Guidelines on Crowdfunding Platforms

INTRODUCTION
Pursuant to Article 125(1)(8) of the Act on Mandatory Pension Funds (Official Gazette nos. 19/14, 93/15, 64/18, 115/18, 58/2020 and 156/2023, hereinafter: MPFF), the assets of a pension fund may, among other things, consist of:
− transferable equity and debt securities and/or business shares offered on crowdfunding platforms within the meaning of Regulation (EU) 2020/1503 of the European Parliament and of the Council of October 7, 2020 on European crowdfunding service providers for businesses and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937 (hereinafter: Crowdfunding Regulation); and/or − transferable equity and debt securities and business shares offered on crowdfunding platforms in accordance with the guidelines set out in Article 125(6). Furthermore, paragraph 3 of the same article provides that when a pension company invests pension fund assets in transferable securities and/or business shares offered on crowdfunding platforms under paragraph 1(8) of that article, the information prospectus must specify the entity in which the assets are invested, the amount of assets invested, the rationale for such investment, the revenues generated, and the revenues expected in the subsequent period. In accordance with Article 125(6) of the MPFF, Hanfa adopts these Guidelines on Crowdfunding Platforms. Additionally, pursuant to Article 211.a of the MPFF, Hanfa is authorized to inform certain groups of supervised entities and other addressees through various types of publications (instructions, guidelines, etc.) regarding the explanation or application of certain regulations within its competence or related general legal acts. Accordingly, Hanfa adopts these Guidelines on Crowdfunding Platforms (hereinafter: Guidelines) and informs pension companies about crowdfunding platforms where transferable equity and debt securities and business shares may be acquired on behalf of mandatory pension funds.

CROWDFUNDING PLATFORMS
The Crowdfunding Regulation governs the provision of crowdfunding services by legal entities with their registered office in the European Union.
Crowdfunding platforms managed by crowdfunding service providers in compliance with the requirements of the Crowdfunding Regulation are considered crowdfunding platforms under Article 125(1)(8) of the MPFF. The provisions of the Crowdfunding Regulation apply to these crowdfunding platforms, but the conditions stipulated in these Guidelines do not. Conversely, crowdfunding platforms managed by a crowdfunding service provider with its registered office outside the European Union, to which the Crowdfunding Regulation does not subsequently apply, are considered crowdfunding platforms under Article 125(1)(8) of the MPFF only if they meet the conditions stipulated in these Guidelines. A crowdfunding platform under Article 125(1)(8) of the MPFF refers to a trading platform that provides access to financing for small and medium-sized enterprises (SMEs), particularly innovative and so-called start-up companies in their early stages of operation (so-called crowdfunding platforms). However, investing in such companies involves specific risks, particularly liquidity risk, the risk of non-payment of profits, and the risk of losing the entire investment, especially regarding so-called start-up entities. These risks will also vary depending on whether the entity is a start-up or an SME seeking additional financing for business growth, as well as the operating rules of the platform itself and the level and type of information provided by the platform and project owner to potential investors. Furthermore, since the operations of crowdfunding platforms outside the European Union are not unified (as achieved by the Crowdfunding Regulation at the EU level), it is necessary to rely on existing national frameworks of individual countries, which also affects investment risk assessment. Therefore, when making a decision to invest in assets traded or offered in the aforementioned manner, a pension company must identify and assess the specific risks to which the mandatory pension fund is exposed as a result, determine a risk management strategy for these risks, and implement protective measures as necessary. Such risks relate to the specific investment but also to the platform itself where the investment is realized. When selecting a platform, the pension company must also consider the features of the national framework governing the crowdfunding platform's operations, how long the platform has been operating, its business performance, reputation, whether it has a business continuity plan, and how platform closure might affect the mandatory pension fund's ability to recover its investment. The conditions that such an investment must meet to be permitted are as follows:
a) it involves investing in transferable equity and debt securities and/or business shares of start-up, small, or medium-sized enterprises (investment instrument); b) it involves start-up, small, or medium-sized enterprises (trading companies) established in the Republic of Croatia, but exceptionally it may also involve start-up, small, or medium-sized enterprises (trading companies) established in an EU Member State or OECD Member State if they predominantly employ Croatian workers; c) transferable equity and debt securities and/or business shares of start-up, small, or medium-sized enterprises must be issued or traded on a crowdfunding platform established in an OECD Member State that is not an EU Member State, which has regulated such capital-raising systems by national legislation, and which is recognized by the national authority competent for the capital market or another national authority responsible for such platforms, between which and Hanfa effective information exchange and cooperation mechanisms have been established, and Hanfa regularly publishes on its website a list of competent authorities with which it has concluded such agreements; d) platforms under point c) must provide investors and potential project/investment investors on their platforms with sufficient information about the investment instrument and its issuer so that investors and potential investors can assess the risks they are exposed to before making an investment, such as:
− information about the project owner(s) and the project, − main characteristics of the crowdfunding process and capital-raising conditions, − overview of major risks related to project financing, sector, project, project owner, and the issued instrument, − information regarding the offer of investment instruments, such as total amount and type of investment instruments to be offered, subscription price, subscription and payment conditions, custody and delivery of investment instruments to investors, etc., − data on the issuer if the issuer differs from the project owner (e.g., special purpose vehicle), − investors' rights, fees, legal protection, and other information; e) platforms under point c) must make available to investors and potential investors information from which the risk profile of the platform itself can be assessed, as well as the impact of the platform's operational risks on the mandatory pension fund's ability to recover its investment. Accordingly, within the meaning of Article 125(1)(8) of the MPFF, in addition to crowdfunding platforms that meet the conditions stipulated by the Crowdfunding Regulation, mandatory pension fund assets may be invested in transferable equity and debt securities and/or business shares offered on crowdfunding platforms that meet the aforementioned conditions. When a pension company intends to invest mandatory pension fund assets in assets under Article 125(1)(8) of the MPFF in accordance with these Guidelines, it must:
− assess whether the investment instrument into which it intends to invest, as well as the platform where it plans to execute the investment, meet the aforementioned conditions under points a) through e) of these Guidelines; − conduct such investments only on platforms that meet the stipulated conditions; − submit to Hanfa a notice regarding the assessment of the platform under point c) where investments are first planned to be executed in accordance with these Guidelines, along with the assessment itself. The pension company submits such platform assessment under point c) to Hanfa for each new platform 30 days prior to investing on the new platform. If Hanfa does not object to the submitted assessment within this period, the platform is deemed to meet the conditions of these Guidelines at that time and recognized in accordance with the provisions of the MPFF and these Guidelines. The pension company must regularly review the platform assessment, at least annually, and notify Hanfa within 3 working days if it determines that the platform no longer meets the conditions stipulated in these Guidelines.

TRANSITIONAL AND FINAL PROVISIONS
Hanfa will review these Guidelines and their application and implementation, and may revise them as necessary.
These Guidelines are published on Hanfa's website and enter into force upon publication.
Upon the entry into force of these Guidelines, the Guidelines on Regulated Capital Raising Systems dated October 31, 2019 (CLASS: 011-02/19-03/05, REGISTRATION NO.: 326-01-70-72-19-5) cease to apply.
CLASS: 011-01/24-03/07
REGISTRATION NO.: 326-01-70-72-24-1
Zagreb, September 4, 2024.
CHAIRMAN OF THE MANAGEMENT BOARD dr. sc. Ante Žigman