Guidelines on Marketing Communication relating to Crowdfunding Services

1 Based on Article 15(4) of the Act on the Croatian Financial Services Supervisory Agency (Official Gazette nos. 140/05 and 12/12), Articles 27 and 28 of Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for businesses, and Articles 5 and 20 of the Act implementing Regulation (EU) 2020/1503 on European crowdfunding service providers for businesses (Official Gazette no. 144/2021), the Croatian Financial Services Supervisory Agency, at its Management Board meeting held on 25 August 2022, adopts GUIDELINES ON MARKETING COMMUNICATION RELATING TO CROWDFUNDING SERVICES

1. Introduction Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for businesses¹ (hereinafter: the ECSP Regulation) permits competent authorities of Member States or EEA states to publish national requirements applicable to marketing communications concerning crowdfunding service offerings and projects in that Member State or EEA state. The purpose of these Guidelines is to provide an overview of the marketing communication rules applicable to crowdfunding services provided by domestic and EU crowdfunding service providers to clients in the Republic of Croatia. The Croatian Financial Services Supervisory Agency (hereinafter: Hanfa) is responsible for implementing and supervising compliance with relevant provisions relating to marketing communication distributed in the Republic of Croatia. The terms "marketing communication" or "marketing content" refer to any information or content that a crowdfunding service provider addresses to a potential investor in the Republic of Croatia or a potential project owner in the Republic of Croatia regarding the crowdfunding service provider's services, excluding the disclosure of investor data required under the ECSP Regulation. These Guidelines indicate the relevant requirements that a crowdfunding service provider must comply with when promoting its services through marketing communication. Considering that marketing communication or marketing content may also be in oral form, the provisions of these Guidelines apply accordingly to cases where marketing communication or content is not in written form.

2. Application

3. These Guidelines apply to: a) any marketing communication or content distributed to or within the Republic of Croatia; and b) any marketing communication or content disseminated, published, broadcast, or otherwise received in the Republic of Croatia.

4. No person other than a crowdfunding service provider may distribute or promote the distribution of marketing communication or content to or within the Republic of Croatia, unless such communication or content has been approved by a crowdfunding service provider. A crowdfunding service provider approving such marketing communication must ensure that all marketing communication distributed or mainly distributed to or within the Republic of Croatia is presented in accordance with the requirements of the ECSP Regulation, these Guidelines, and any other relevant legislation of the Republic of Croatia.

5. Relevant Croatian legislation specifically includes the Act implementing Regulation (EU) 2020/1503 on European crowdfunding service providers for businesses (hereinafter: the ECSP Implementation Act), the Consumer Protection Act², and the Unfair Advertising Act³.

6. All terms used in these Guidelines have the same meaning as in the ECSP Regulation and the ECSP Implementation Act.

7. These Guidelines do not apply if the approved or distributed marketing communication or delivered information consists exclusively of one or more of the following: a) name of the crowdfunding service provider; b) logo or other visual representation associated with the crowdfunding service provider; c) contact details; d) reference to the services of the crowdfunding service provider (via a link, without description).

8. General Requirements

9. A crowdfunding service provider must ensure that all information or marketing communication it approves or distributes: a) is prepared and presented so as to be expected to be understood by the average member of the identified target market to which the communication is directed or likely to receive such communication; b) is up-to-date and relevant with regard to the communication means used; c) is consistently presented in the same language across all forms of informational and marketing materials delivered to each client, unless the client has agreed to receive information in different languages.

10. A crowdfunding service provider ensures that all marketing content regarding its services, including marketing content created by third parties, is clearly identifiable as such, in accordance with Article 27(1) of the ECSP Regulation.

11. A crowdfunding service provider promoting its services through marketing communication must ensure that information addressed to clients and potential clients contained in such communications is fair, clear, and not misleading, in accordance with Article 27(2) of the ECSP Regulation, which includes communication regarding: a) the crowdfunding service provider itself; b) costs, financial risks, and fees related to crowdfunding services or investments offered under the crowdfunding service; c) project selection criteria for crowdfunding; and d) the nature of crowdfunding services and associated risks.

12. A crowdfunding service provider shall also ensure that all information and marketing communication is consistent with all information: a) contained in the Key Information Sheet for Investment ("KIIS"), explicitly stating that the KIIS is available and where; alternatively, if the KIIS is not yet available, information that must be contained in the KIIS according to the ECSP Regulation provisions is provided; b) that a crowdfunding service provider provides to a client during the provision of services, and, if applicable, ancillary services. If the KIIS is available, marketing communication must include a recommendation that potential investors read the KIIS before making an investment decision to fully understand the potential risks and benefits associated with the investment decision.

13. A crowdfunding service provider is required to, for all distributed information or marketing communication: a) use Croatian and/or English in the Republic of Croatia; b) use one or more official languages of the Member State⁴ where marketing communications are distributed, or a language accepted by the competent authorities of that Member State, in other Member States. All translations of distributed information or marketing communication into any of the languages mentioned in this point are considered to be prepared under the responsibility of the crowdfunding service provider. Such translations must faithfully reflect the content of the original information and/or marketing communication.

14. In all marketing communication stating that a crowdfunding service provider is supervised by Hanfa or the competent authority of another EU Member State, as applicable, and when providing information to clients, a crowdfunding service provider must include the regulatory statement from point 12 of these Guidelines together with a reference to the relevant legislation (ECSP Regulation) regulating supervision.

15. A crowdfunding service provider will use in its regulatory statement the following text or adapted text (depending on the specific situation), which contains this information: a) "[ Full legal name of the crowdfunding service provider ] is a company licensed and supervised by the Croatian Financial Services Supervisory Agency" under the ECSP Regulation; or b) "[ Full legal name of the crowdfunding service provider ] is a company licensed and supervised by [ inserted name of the competent authority of the Member State from which the crowdfunding service provider obtained approval ] in [ inserted name of the Member State where that competent authority is headquartered ] under the ECSP Regulation, and is also subject to supervision by the Croatian Financial Services Supervisory Agency regarding rules relating to marketing communication in the Republic of Croatia."

16. A crowdfunding service provider must not use the name of Hanfa or another competent authority in a manner that indicates or suggests support or endorsement by the competent authority or promotion of the crowdfunding service provider's services.

17. A crowdfunding service provider is required to ensure: a) that the design, presentation, and content of marketing communication are clear, appropriate, accurate, and not misleading, and that it can be reasonably expected from each client to immediately understand that it is marketing communication, where "accuracy" of information is assessed based on a balanced presentation of different characteristics that must not hide any element significant for the product, service, or client; b) that the purpose of marketing communication is not to influence a person's attitude towards market offerings, products or services, or crowdfunding service providers, whether by ambiguity, exaggeration, or failure to convey relevant information; c) that the nature and type of market offerings, products or services are clear and not hidden in any way; d) that important items, statements, or warnings are clearly highlighted and not hidden in any way; e) that exploitation of any characteristic of a product or service and/or circumstances related therewith is avoided with the intention of bringing the client to an unfavorable situation where they would be subject to a reduced level of informed understanding of product or service risks (in the context of understanding information provided to them).

18. A crowdfunding service provider is required to ensure that information and marketing communication do not mislead, particularly regarding: a) the nature of offerings, products or services offered; b) the independence of the crowdfunding service provider or the independence of information it provides; c) the ability and capacities of the crowdfunding service provider to offer, product or service; d) the scope of activities of the crowdfunding service provider; e) the extent of own funds and resources of the crowdfunding service provider; f) the nature of participation of the crowdfunding service provider or any other person in offerings, products or services offered; g) the scarcity of offerings, products or services offered; h) past performance or possible future performance of offerings, products or services; i) all relevant risks.

19. A crowdfunding service provider must not highlight any potential advantages of offerings, products or services without providing an unambiguous, clear, appropriate, and prominent indication of relevant risks. Furthermore, when describing its activities, a crowdfunding service provider must refrain from using laudatory or flattering expressions that might promote its services and projects. In practice, when a crowdfunding service provider presents the project selection process, potential investors must not be led to conclude that such projects and offerings are risk-free, nor must risks be minimized or underestimated.

20. A crowdfunding service provider should avoid using laudatory or superlative expressions such as, for example, "best or better projects" or "most attractive opportunities", and should avoid sales techniques that excessively mention "growing companies", "revised projects", "transparent investments" or "safe services", as such statements may prove to be misleading, and potentially inaccurate.

21. A crowdfunding service provider is required to ensure that all information and marketing communication addressed or distributed in a manner likely to be received by clients clearly indicates the name and address of the crowdfunding service provider, including information about the provider's website.

22. A crowdfunding service provider is required to ensure that any information or marketing communication does not disproportionately encourage investment in any single crowdfunding project. In this regard, before the close of the fundraising period for a specific project or projects, marketing communication must not be disproportionately directed at planned, unresolved, or ongoing individual projects or offerings.

23. Information to be Included in Marketing Communication:

24. A crowdfunding service provider is required to ensure that any publication, warning, or other disclaimer to be included in any marketing communication or information is displayed prominently, clearly, and understandably. In this regard, a crowdfunding service provider must ensure that: a) disclaimers, risk warnings, and other references used in marketing communications or information are of sufficient size and prominence to be clearly legible, and their content, design, or format do not diminish, hide, or obscure them in any way; b) the font size used in describing/indicating relevant risks is at least equal to the prevailing font size used in all delivered information, and the appearance ensures that such description or indication is noticeable; c) communication means used for publishing marketing communication or conveying information to clients are taken into account, as well as all potential limitations and/or shortcomings associated with using a specific communication means; d) performance data are not selected so as to overstate success or hide a lack of success of offerings, products or services; and e) results of past offerings or possible future performance/success of a specific offering, product or service are not the exclusive focus of marketing communication. No marketing communication mentioning only potential (positive) performance of offerings, products or services provided by a crowdfunding service provider is allowed without clearly stating the associated risks.

25. A crowdfunding service provider must not mention offerings, products or services that have been successfully completed or are currently being implemented, success rates of offerings, products or services, or success rates of successfully subscribed offerings, products or services, without simultaneously informing potential clients about unsuccessful offerings, products or services, products or services that resulted in a loss, or those that do not meet conditions (depending on which information is relevant). In particular, when it comes to crowdfunding services consisting of enabling loan approvals, a low rate of non-repaid loans cannot be presented as an indicator of the quality of project offerings, products or services provided by a crowdfunding service provider. Moreover, if a crowdfunding service provider mentions successful exits (completions of projects where lenders were successfully repaid) or repayments for lenders before the loan maturity date, it must clearly state at the same location projects, products or services that created losses for lenders, as well as total invested amounts, thereby enabling the calculation of losses or default rates.

26. A crowdfunding service provider is required to ensure that marketing communication offering promotional or introductory/initial interest rates (interest rates that change after a certain initial period) clearly states the expiration date of such interest rate and provides clear data on the specific rate that will be applied thereafter.

27. A crowdfunding service provider is required to ensure that all assumptions on which statements, promises, or forecasts contained in marketing communication are based are clearly stated, reasonable, and up-to-date.

28. A crowdfunding service provider is required to ensure that, when any information or marketing communication contains comparisons, the following conditions are met: a) comparisons are relevant, meaningful, and presented in a clear, appropriate, and balanced manner, omitting nothing material to conclusions that can be drawn from the comparison; b) sources of information used for comparisons must be stated, and key facts and reasonable assumptions on which the comparison is based must be included in the marketing communication.

29. A crowdfunding service provider is required to ensure that any information or marketing communication containing initials or abbreviations also states what those initials or abbreviations mean.

30. A crowdfunding service provider must not describe offerings, products or services in information or marketing communication as free, unless the offering, product or service is entirely available to the client for free. A crowdfunding service provider must ensure that information or marketing communication describing offerings, products or services includes information regarding possible intermediary or sales fees if charged to the client or potential client.

31. When information and marketing communication contain price claims, a crowdfunding service provider must ensure that all main criteria regarding the determination of the minimum price for offerings, products or services are included in the main body of information or marketing communication, and, if applicable, potential maximum savings related to offerings, products or services.

32. A crowdfunding service provider is required to ensure that, when any information or marketing communication contains a reference to a specific tax treatment of an offering, product or service, it includes: a) details on the tax treatment of offerings, products or services, which are complete, appropriate, relevant, accurate, and not misleading; b) an indication of whether the crowdfunding service provider assumes responsibility for withholding tax; c) a statement that the provided information relates to relevant applicable legislation on the date of providing such information and that such tax arrangements may change in the future; d) when information relates to a specific tax treatment, it will clearly state that the tax treatment depends on the individual circumstances of each client and may be subject to changes in the future.

33. Warning Statements:

34. A crowdfunding service provider is required to ensure that warning statements whose use is required by this section are located in a prominent place and that the font size is at least equal to the prevailing font size used in the document, marketing communication, or information, and are displayed together with any advantages of offerings, products or services. In the case of media where marketing communications or information are transmitted in non-written form (e.g., television, radio, other similar communication channels), warning statements must be stated or transmitted at the end of the marketing communication or information.

35. A crowdfunding service provider is required to ensure that each marketing communication or information contains the following warning statements, where applicable: a) If marketing communication contains information on past performance of offerings: i. such information must not be the most prominent feature of communication or information, and the reference period and source of information must be clearly stated at all times; ii. information must contain a prominent warning that the data relate to the past and that past performance is not a reliable indicator of future results; for this purpose, a crowdfunding service provider will use the following text or adapted text as needed in specific circumstances, which communicates the same information/warning: Warning The performance data mentioned relate to the past and past performance indicators are not a guarantee of future performance or a reliable indicator of future results. iii. when information on past performance relies on data denominated in a currency other than the currency of the Member State where the client has residence, the currency must be clearly stated, together with a warning that returns may increase or decrease as a result of exchange rate changes; for this purpose, a crowdfunding service provider will use the following text or adapted text as needed in specific circumstances, which communicates the same information/warning: Warning Changes in exchange rate movements may affect this [offering/product/service], which affects the return on your investment. b) If information or marketing communication contains illustrations or information on simulated performance: i. includes clear information on which specific past offering/project (or several) the simulated performance was derived; ii. information on simulated performance must not be the most prominent feature of communication or information; iii. reference period and source of information are clearly stated at all times; iv. information contains a prominent warning that simulated data relate to past performance and that past performance is not a reliable indicator of future results, for which purpose a crowdfunding service provider will use the following text or adapted text as needed in specific circumstances, which communicates the same information/warning: Warning The performance data mentioned are only estimates and are not necessarily a reliable indicator of future results or success of this investment. c) If an offering, product or service is denominated in a foreign currency, when the price is displayed in a foreign currency, or when changes in exchange rates may directly affect the value or price of an offering, product or service, a crowdfunding service provider will use the following text or adapted text as needed in specific circumstances, which communicates the same information/warning: Warning Changes in exchange rates may affect this [offering/product/service]. d) In marketing communication relating to crowdfunding services, it must be clearly indicated that investment in crowdfunding projects involves risks, including the risk of partial or total loss of funds invested by the client. For this purpose, a crowdfunding service provider will use the following text or adapted text as needed in specific circumstances, which communicates the same information/warning: Warning Investment in this crowdfunding project involves risks, including the risk of partial or total loss of invested money. Your investment is not covered by the deposit guarantee system established in accordance with Directive 2014/49/EU of the European Parliament and of the Council. Your investment is not covered by investor compensation systems established in accordance with Directive 97/9/EC of the European Parliament and of the Council. It is possible that you will not achieve any return on your investment. This is not a savings product and we advise you to invest no more than 10% of your total investable assets in crowdfunding projects.

¹ Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for businesses amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (Text with EEA relevance) (OJ L 347, 20. 10. 2020.) ² Official Gazette no. 19/22. ³ Official Gazette no. 43/09. ⁴ Including European Economic Area member states.