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Germany Gets Tougher on Crowdfunding Rules

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The German government will publish new rules for companies looking to raise funds through online crowdfunding platforms to protect the investors from frauds while still supporting innovation.

Some of the key points under the new rules that are set to be rolled out are:

  • Startups wanting to raise €2.5 million or $2.7 million and more through crowdfunding will be required to provide detailed prospectus and disclose all investment risks to the potential investors.
  • The Federal Financial Supervisory Authority will supervise the advertising of such investments and can restrict those that seem problematic.
  • Retail investors will be able to get their money refunded within 14 days after they agree to invest in a startup.
  • Private investors will not be able to invest more than €10,000 in a crowdfunding venture and if they want to invest more than €1,000, they will need to have a minimum of €100,000 in liquid funds or monthly net income.

The FinTech start-up industry has welcomes the new rules. Florian Nöll – Chairman of the German Startup Association:

“We welcome the compromise because it establishes a functioning framework for crowdinvesting.  Crowdinvesting has become an important funding source for founding of innovative companies over the past two years.”

I’m keen to find out how other European financial services regulators will respond to this move from the German government on crowdfunding: if education and protecting social investors will always be critical in driving the adoption of crowdsourcing and crowdinvesting, it’s also essential to foster innovation and encourage new FinTech startups to relentlessly disrupt the banking industry and come up with new ways to empower the customers.

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