Step-by-Step Plan for Crowdfunding Platforms: Improve Quality and Increase Investor Trust

1 Step-by-Step Plan for Crowdfunding Platforms: Improve Quality and Increase Investor Trust

It is important that your crowdfunding platform provides reliable and professional services for investors and project owners. With this step-by-step plan, we have made the regulations accessible and hope to help you implement these regulations. This way, you not only continuously strengthen your compliance, but also the trust of investors and project owners. By placing greater transparency, good risk management, and clear communication at the center, you build a future-proof crowdfunding platform. This document contains a step-by-step plan for further professionalizing business operations and increasing the quality of services. Based on the current laws and regulations of the European Crowdfunding Service Providers Regulation (ECSPR). The step-by-step plan consists of six parts. Each part has a number of action points with handles that allow you to gradually examine your business operations and services and improve them where necessary. 1 Information Provision 2 Admission Knowledge Test 3 Loss Simulation 4 Conflict of Interest Policy 5 Business Continuity Plan 6 Management of ICT Risks STEP-BY-STEP PLAN July 2025

2 1 Information Provision Be clear about risks, returns, and costs of crowdfunding Provide the Key Investor Information Document Give prominent placement to the default rate on loans 2 Admission Knowledge Test Explain the importance of the test to the (prospective) investor Ensure the test is complete Test the knowledge of a (prospective) investor Use simple language that (prospective) investors understand Explain the outcome of the test 3 Loss Simulation Clearly explain what each part of the calculation means and how a (prospective) investor can calculate it Give investors clear explanations about the purpose of the loss simulation and what it means for the investor Ask investors to report the outcome to the crowdfunding platform Make the use of the loss simulation as easy as possible 4 Conflict of Interest Policy Integrate the conflict of interest policy into daily operations Ensure the conflict of interest policy is actively followed Ensure the conflict of interest policy is tested annually and adjusted if necessary Ensure conflicts of interest are disclosed if they do occur 5 Business Continuity Plan Ensure the business continuity plan, including outsourcing parties, is tested and updated periodically (at least once every two years) 6 Management of ICT Risks Ensure a robust governance control framework is implemented for ICT risks to manage ICT risks effectively Implement an effective ICT change management process Ensure the identity management process and access control are effectively secured in practice Implement, also for outsourcing parties, a clear and effective strategy for governance & control Action Points

3 1 Information Provision: Three points of attention The importance of good information provision A key part of responsible business is good information provision to (prospective) investors. Investors must be able to trust that all information they receive regarding crowdfunding services or investments is correct, clear, and not misleading.1 This also applies to promotional communications.2 Think, for example, of communications containing advertising about crowdfunding on (platform) websites and banners, email marketing to customer databases, or communications on social media. Such advertising communications and other communications must independently comply with legislation. Clear communication is not only an obligation but also a strategic instrument. It increases investor trust, prevents complaints, and protects the platform's reputation. It also contributes to the maturity of the sector, where responsible parties are characterized by their professionalism and reliability. Be clear about risks, returns, and costs of crowdfunding What is needed? It is important that crowdfunding platforms are transparent about the risks and costs of crowdfunding services and investments, and about the nature of these services.3 When the risks of crowdfunding are communicated insufficiently or unclearly, investors may be misled in their decision to invest. This can lead to financial damage. In what way? Findable Crowdfunding platforms must clearly and concretely describe the risks of crowdfunding. Both at the platform level and at the project level (specifically for each project). In addition, all information for investors must be presented in an easily readable and understandable manner, especially for non-experienced (prospective) investors. It is important that an investor does not have to search for the information themselves. Understandable Information about risks must be understandable to a broad audience. This means: no jargon or vague language. Risks must not be phrased positively or downplayed. Action Points Information Provision Be clear about risks, returns, and costs of crowdfunding Provide the Key Investor Information Document Give prominent placement to the default rate on loans 1 See Article 19(1) ECSPR. 2 See Article 19(1) ECSPR and Article 27 ECSPR. 3 See Article 19 ECSPR and Article 16 Delegated Regulation (EU) 2024/358.

4 Even when crowdfunding platforms work with certain securities for investors on loans, they give a clear explanation of the stipulated securities (such as guarantees or collateral). Balanced Investors must have access to balanced information so that they can make an informed decision. Balanced information contains both the relevant benefits and the relevant disadvantages or risks of the product, and makes the disadvantages or risks of the product equally visible as the benefits. Preventing misleading information Crowdfunding platforms and project owners must not make misleading or unrealistic claims, for example about expected returns or depicting highly positive scenarios. Also make it clear to investors whether any costs are deducted from the return. Difference in risk between crowdfunding and saving If crowdfunding platforms make comparisons between crowdfunding and saving, or a return compared to savings rates, they must clearly state the difference in risk. A savings product is essentially different from a crowdfunding investment. Stating the difference in risk prevents consumers from underestimating the risks of crowdfunding through incorrect comparisons, and ensures they make a choice for crowdfunding based on the correct premises. Provide the Key Investor Information Document What is needed? Crowdfunding platforms provide the Key Investor Information Document to prospective investors before they decide to invest. Crowdfunding platforms use the model intended for this purpose.4 In what way? Moment of provision Crowdfunding platforms must provide the Key Investor Information Document and present it in an easily readable form. Ensure that the prospective investor is well informed in advance about the key points of a crowdfunding project, in concise and clear language, avoiding technical terms as far as ordinary words can be used. Simply placing the document at the very bottom of a web page is, for example, not sufficient. Ensure that the document is not easily missed by consumers when included in the digital environment, and that it remains accessible. Name and content The filename of the Key Investor Information Document must clearly indicate what the document is about. Investors must immediately understand what they can expect from the content. A short designation like 'Ebi' is not clear and does not encourage prospective investors to open the file. Also, the Key Investor Information Document must be presented on a standalone durable medium (for example, a separate PDF), and may be a maximum of six pages.5 Responsibility for provided information Although the project owner is responsible for the content of the Key Investor Information Document, the platforms are responsible for checking the completeness, accuracy, and clarity of this Key Investor Information Document. They must also provide this information to (prospective) investors. There is thus a shared responsibility towards the (prospective) investor. Give prominent placement to the default rate on loans What is needed? Crowdfunding platforms offering loans must prominently publish the current default rate on their website. The default rate gives consumers insight into the percentage of projects on the platform that have encountered payment problems.6 5 See Article 23, seventh paragraph, ECSPR. 6 See Article 20 ECSPR and Delegated Regulation (EU) 2022/2115.

5 In what way? Publication of the default rate The default rate is updated at least annually with respect to the crowdfunding projects that have been offered via the platform for at least the past 36 months. It is important that the default rate is findable in a prominent place on the website, so that investors have easy access to this important information. 2 Admission Knowledge Test Crowdfunding offers (prospective) investors investment opportunities. However, there are also risks associated with this way of investing. Therefore, investing in crowdfunding is not suitable for every investor. The admission knowledge test is intended to give investors insight into whether investing via crowdfunding is suitable for them. The goal is to prevent investors who have little or no knowledge from unknowingly taking (too) large risks and thereby falling into financial difficulties. The admission knowledge test is not mandatory for experienced investors. Wherever in this chapter '(prospective) investor' or 'investor' is written, it refers to the non-experienced (prospective) investor. Explain the importance of the test to the (prospective) investor The admission knowledge test only adds value if the information obtained from the (prospective) investor gives a good picture of their situation. This means that the investor has an important role in providing this information completely and truthfully. A crowdfunding platform can increase the chance of receiving reliable information. A good explanation of this test is therefore essential. The AFM advises focusing on the importance and relevance for the investor of the test, rather than just emphasizing that legislation requires the platform to administer the questionnaire. For example, by explaining that the platform uses this information to estimate whether the intended investment is suitable for the investor. And that current and accurate information is important to make a good assessment. Ensure the test is complete The admission knowledge test consists of several parts. To make a good assessment of whether investing in crowdfunding is suitable for a (prospective) investor, all parts must be included in the admission knowledge test. A crowdfunding platform therefore gathers information about experience, investment objectives, financial situation, and basic understanding of the risks associated with investing.7 Action Points Admission Knowledge Test Explain the importance of the test to the (prospective) investor Use simple language that (prospective) investors understand Ensure the test is complete Explain the outcome of the test Test the knowledge of a (prospective) investor 7 This obligation follows from Article 21(2) ECSPR in conjunction with Article 2(1) Delegated Regulation 2022/2114.

6 Below we discuss these parts, and explain what information is relevant here. Experience A crowdfunding platform must, among other things, gather information from the prospective investor about their experience. Depending on the nature, size, and complexity of the crowdfunding service and the type of investment, this will at least include the following information:8 • The types of investment services and types of investments the investor has experience with; • Information about previous transactions in securities, crowdfunding-admitted instruments, or loans. This can include the frequency, size, and volume of transactions and the period in which this took place; • Education level and (former) profession, especially where there is a relationship with knowledge or experience related to crowdfunding investments. Here it is always important that the specific information requested is relevant to the investments offered on the platform. For example, experience with loans does not necessarily need to be asked for if a platform does not offer loans. And if a platform specializes in real estate investments, the information about experience should also relate to experience with real estate investments. Investment Objectives A platform gathers information about the following parts of the investment objectives of a (prospective) investor:9 • The goal of the investment The platform assesses whether the goal aligns with the investments on the platform. Not all investors can immediately state a concrete objective. But there is usually one. Investing is indeed the means to achieve a goal and not a goal in itself. An investment objective can be, for example, a target amount (for a spending goal or wealth building for later) or a certain expected return. With a concrete spending goal, the investment horizon (see below) is particularly important. • The expected investment horizon Investing takes time. Therefore, it is not advisable to invest money for a short period. This applies even more to crowdfunding investments, as exiting midway is often not possible. Therefore, a platform assesses whether an investor has a sufficiently long investment horizon that fits the expected duration of the investment, and whether the investor does not expect to need the invested money again within a few years. • The risk profile of the (prospective) investor An investor can lose their investment if a crowdfunding project goes bankrupt or can no longer meet its payment obligations. Therefore, the platform assesses whether the investor's risk tolerance aligns with this. Does an investor not want to risk losing (part of) their investment? Or do they get very nervous from uncertainty? Then crowdfunding is not a suitable investment. • The preferences of the (prospective) investor regarding the sustainability of the investments Some investors have specific wishes or objectives regarding the sustainability of their investments. A platform must gather these preferences so that the platform can assess whether these wishes can be met or not. 8 Furthermore, it is important to form an image of the knowledge of the (prospective) investor. See the paragraph 'Test the knowledge of a (prospective) investor'. 9 This obligation follows from Article 21(2) ECSPR in conjunction with Article 2(2) Delegated Regulation 2022/2114.

7 Financial Situation The financial situation is also part of the admission knowledge test. For this, the platform uses the result of the loss simulation.10 The result of the loss simulation is 10% of the freely investable wealth of the (prospective) investor, expressed as an amount in euros. Investors are advised not to invest more than this amount in crowdfunding investments (see also part 3. Loss Simulation). Based on this result, the platform can also assess whether the intended investment is suitable. Test the knowledge of a (prospective) investor To make a good assessment of the basic understanding of the (prospective) investor, it is important to actually test the knowledge and not ask the investor to self-assess their own knowledge. Example What is an important characteristic of investing in non-listed shares? a This investment offers the potential for high returns, as the shares are not yet traded on the stock exchange. b This brings risks, for example that the shares are difficult to sell or can only be sold at a low price. c It is attractive due to the generally high dividend payments of such shares. Focus on important and relevant knowledge areas The actual testing of the investor's knowledge must address topics relevant to the offering on the platform. A platform must also ensure that, in addition to general knowledge questions, attention is paid to specific characteristics of the crowdfunding platform, for example real estate or sustainable energy. Think of the following topics, for example. What is crowdfunding and how does it work? What role do the platform, the project owner, and the investor play? Example What is the role of the crowdfunding platform? a The platform guarantees the profit of the investment. b The platform selects projects and mediates between the investor and the project developer. c The platform provides subsidies to projects. d The platform participates itself as an investor.

Different forms of crowdfunding (shares, loans, etc.). Example What happens in a loan-based crowdfunding project? a The investor buys shares in a business. b The investor provides a loan to a project owner via the platform and receives interest. c The investor buys bonds on a regulated stock exchange. d The investor donates money without expectation of repayment. 10 This obligation follows from Article 21(2) ECSPR in conjunction with Article 2(2) Delegated Regulation 2022/2114.

8 Benefits and risks of crowdfunding, such as the risk of losing the investment, lack of liquidity, sector-specific risks, etc. Example Which risk is specifically associated with equity-based crowdfunding? a You always get your money back within three months. b Your share can decrease in value or even become worthless. c The government guarantees a minimum return. d The shares are tradable on the stock exchange at any time. The characteristics and limitations of any securities, such as guarantees, mortgage rights, etc. Example What does it mean if a loan in a crowdfunding project is 'subordinated'? a The loan is repaid first before other debts are settled. b The loan has priority over tax claims. c The loan is only repaid after other creditors have received their money. d The interest on this loan is guaranteed monthly. Use simple language that investors understand Ensure clear formulation of questions A crowdfunding platform asks clear questions in simple language. In this way, the chance of misunderstandings is reduced. If difficult terms are used, the platform provides a clear explanation. Example What part of your freely investable wealth* do you plan to invest in crowdfunding projects?

• Freely investable wealth = assets (such as X, Y, Z) – liabilities (such as A, B, C). Explain the outcome of the test What does the outcome of the test mean? Using the obtained information, a crowdfunding platform assesses whether the service is suitable for the (prospective) investor. If this is not the case, the platform must inform the investor.11 Here, a platform preferably explains what the reason(s) are that the investment is not assessed as suitable. This can be because the knowledge is insufficient, the investment horizon is too short, or the risk tolerance is lower than appropriate for a crowdfunding investment. The crowdfunding platform also states that the customer is advised not to proceed with the investment (risk warning).12 11 This obligation follows from Article 21(4) ECSPR. 12 From Article 21(4) ECSPR in conjunction with Article 4(1) Delegated Regulation 2022/2114, it follows that a platform must not encourage a (prospective) investor to proceed with the investment.

9 Provide feedback and support After completing the admission knowledge test, the platform preferably offers investors feedback. This gives them insight into any missing knowledge and helps them better understand the subject. A platform can also consider offering learning materials or additional sources to investors for further deepening. Platforms play a key role in investor education through the administration of this admission knowledge test. Depending on their approach, platforms can increase the learning effect of the admission knowledge test. Offer a different test in case of a retake An investor can of course make a second attempt at the admission knowledge test. To reliably test the knowledge then, a platform preferably uses different knowledge questions. Therefore, it is wise to prepare multiple knowledge questions to draw from. 3 Loss Simulation: (prospective) investor calculates a sensible maximum investment Part of the assessment of whether an intended crowdfunding investment is suitable for a non-experienced (prospective) investor is simulating the capacity to bear losses. Due to the risky nature of crowdfunding, investors are advised to invest a maximum of 10% of their net wealth in crowdfunding projects. The use of an online calculation tool reduces the chance that investors invest more money than they can afford. Investors perform this calculation themselves, via an online calculation tool on the crowdfunding platform's website. In addition to the importance of an accurate calculation, it is important that a platform clearly explains what the result means and what the investor can do with it. The simulation of loss capacity is not mandatory for experienced investors. Wherever in this chapter '(prospective) investor' or 'investor' is written, it refers to the non-experienced (prospective) investor. Clearly explain what each part of the calculation means and how a (prospective) investor can calculate it The calculation of the capacity to bear losses consists of several parts: the income, assets, and obligations of the (prospective) investor.13 The regulations further elaborate how these Action Points Loss Simulation Clearly explain what each part of the calculation means and how a (prospective) investor can calculate it Make the use of the loss simulation as easy as possible Give investors clear explanations about the purpose of the loss simulation and what it means for the investor Ask investors to report the outcome to the crowd- funding platform 13 This follows from Article 21(5) Regulation 2020/1503.

10 different parts must be calculated.14 Financial or legal terms are often difficult for (prospective) investors to understand. Because the investor performs the calculation themselves, they need clear and understandable instructions. 14 See Delegated Regulation (EU) 2022/2114.