Risks of Criminal Behavior in Exempt Offerings

ANALYSIS REPORT
OCTOBER 2025
Risks of Criminal Behavior in Exempt Offerings

In Brief
Companies can, under certain conditions, offer up to €5 million in securities, such as shares and bonds, to the public without an AFM-approved prospectus. From June 5, 2026, as a result of the EU Listing Act, up to €12 million in capital can essentially be raised under this exemption. This reduces the burden on companies. At the same time, the AFM observes that the exemption is being exploited for criminal behavior. It is important that consumers are aware of the risks. The AFM is making preparations to exercise more proactive and data-driven supervision on exempt offerings.

Summary
1 The prospectus requirement is described in Article 3, first paragraph, of Regulation (EU) 2017/1299 (Prospectus Regulation).
2 The amendments to the Prospectus Regulation concerning the exemption are described in Article 1, third paragraph, of Regulation (EU) 2024/2809. This stipulates that the exemption limit in the entire EU is increased to €12 million. Member States, however, have the option to choose a limit of €5 million.
3 Reference date for number of exemption notifications and providers: September 30, 2025.

In this report, the AFM shares its findings from an exploratory study into exempt offerings. These are offerings where less than €5 million in securities is offered over a period of 12 months. These offerings are exempt from the prospectus requirement, provided certain conditions are met.1 The impetus for this study is the expected increase in the exemption limit to €12 million as a result of the EU Listing Act.2 The AFM supports the objective of the EU Listing Act to increase access to capital markets for small and medium-sized enterprises. At the same time, there are significant risks of criminal behavior in exempt offerings. Furthermore, the AFM expects these risks to increase with an increase in the exemption limit. It is important that investors are aware of these risks and that gatekeepers take their responsibility. The AFM intends to exercise more proactive and data-driven supervision on exempt offerings to address the risks.

Exemption Scheme
Small offerings of securities to the public are, under certain conditions, exempt from the obligation to publish an approved prospectus. In principle, there is a prospectus requirement for offerings of securities to the public. A prospectus transparently describes the characteristics, risks, and conditions of an investment, so that investors can make an informed decision. Due to the cost of producing a prospectus, the legislator introduced an exemption for offerings with a total counter-value (per category of security and calculated over a period of 12 months) up to €5 million. However, conditions are attached to this exemption. For example, a provider must make an information document available. The information included in it must be balanced and understandable. The Consumer Protection Enforcement Act (Whc) also applies: providers must not engage in unfair commercial practices, such as providing incorrect or misleading information. The current exemption scheme ensures that investors enjoy a certain degree of protection and that the AFM has visibility of the market and can counter criminal behavior.

Market Landscape
Since 2020, a total of more than 1,600 exempt offerings have been reported to the AFM (hereinafter: exemption notifications), and it is estimated that more than €2 billion has been offered.3 On average, we receive 300 exemption notifications per year. It is estimated that the average total size per year is €400 million. Our exploration reveals the following characteristics of exempt offerings:

• Many offerings have a small size (less than €1 million). Offerings with a size just below the exemption limit (between €4.9 and €5 million) also occur relatively frequently. These offerings represent more than 25% of the total market size.
• Nearly 60% of the total size of the sub-market is represented by bonds.
• Nearly 85% of the offerings are directed at non-professional investors, who are generally more vulnerable.
• At least 40% of the funds raised are invested in assets. This mainly concerns real estate, but also land, financial instruments, wine/whiskey, shipping, crypto, and precious metals. Additionally, nearly 40% is invested in sustainable energy and 'other sustainable initiatives'.

Risks of Criminal Behavior
The exemption offers an opportunity for criminal behavior. Malicious providers can raise large sums of money and cause (extensive) damage without too many barriers. This emerges from the many signals received by the AFM, and the AFM's investigations and measures. Since 2020, the AFM has received more than 300 signals regarding exempt providers. These providers have offered securities worth at least nearly €380 million.4 In 2024 alone, we received 66 signals. These include signals of suspected Ponzi frauds where the potential damage from a stacking of offerings amounts to tens of millions. Since 2020, we have initiated 78 investigations. These investigations have resulted in 35 measures, including 8 formal measures, including four reports of suspicion of fraud or embezzlement. Our investigations reveal that the following forms of criminal behavior occur regularly (and often in conjunction):

• Illegality: (groups of) providers exceed the €5 million limit;
• Misleading: Providers provide incorrect or misleading information to investors, for example regarding expected returns, the use of proceeds, or risks associated with the investment;
• Ponzi fraud: Investment from new investors is used to pay interest and repayment to existing investors; and
• Self-enrichment/embezzlement: Criminals use exempt offerings to enrich themselves and others, e.g., by making private expenditures or smuggling money under the guise of 'costs'.
  An increased risk in exempt offerings seems to be related to a number of (common) characteristics: offering to private investors, bonds, investments in assets, high expected returns, maximum permitted size, and stacking of offerings. Crowdfunding platforms, (legal) service providers, and also, for example, notaries can, on the one hand, play an important gatekeeper role, but on the other hand, their services can facilitate criminal behavior (consciously or unconsciously).

AFM Supervision
The AFM wants to exercise more proactive and data-driven supervision to reduce the risks of criminal behavior. The AFM's supervision of exempt offerings is limited. This limited supervision is largely inherent to the exemption: under the exemption, providers are not required to draw up a prospectus and have it approved by the AFM. This makes it presumably attractive for malicious providers to use the exemption. The AFM supports the objective of the EU Listing Act to increase access to capital markets for small and medium-sized enterprises. At the same time, it is expected that the risks of criminal behavior will increase due to an increase in the exemption limit to €12 million. To be able to exercise more proactive and data-driven supervision, it is necessary that the notification obligation and the requirement for providers to make an information document available remain in place.

Role of Gatekeepers
The AFM calls on gatekeepers (such as crowdfunding platforms) to be alert to the misuse of the prospectus exemption. Crowdfunding platforms can reduce the risk of criminal behavior by (among other things) adequate screening of project owners, good information provision to investors, and countering conflicts of interest.

What can you do as an investor yourself?
It is important that investors are aware of the risks involved in investing outside prospectus supervision. Investors are advised to carefully read the information document and any other documentation, such as the bond conditions, and to ask critical questions in case of uncertainty, for example about the provider and other involved persons, the use of funds, the return, the financial situation, and the risks. As always applies: when something seems too good to be true, it probably is.

1. Introduction
   1.1 Impetus
   From June 5, 2026, the exemption limit will be increased to €12 million throughout the EU as a result of the EU Listing Act.5 This increase prompted the AFM to further explore the risks of criminal behavior in exempt offerings. In the Netherlands, it is now permitted to offer securities with a total counter-value of less than €5 million6 (per category of security and in a period of 12 months) to the public without an approved prospectus.7 The AFM regularly receives signals about (possible) misconduct in exempt offerings. The AFM also has indications that the conditions of the exemption are regularly not met because more money is raised than allowed, or, for example, no information document is made available.
   1.2 Objective and Scope
   The objective of the exploration is to (better) understand the risks of criminal behavior in exempt offerings and to improve (supervision) of this sub-market, thereby reducing the risks of criminal behavior. 'Criminal behavior' is understood as:
   "Behavior that is contrary to the law and aims at personal or business gain, characterized by:

• Misleading consumers
• Illegal use of the financial sector, including money laundering and (partial) illegality, and
• Damage in the market or to consumers by placing self-interest at the center."
  Within the exploration, we looked at offerings that fall within the scope of Article 53 of the Exemption Regulation Wft, namely: (1) offerings where the €5 million exemption was relied upon and (2) offerings under €1 million that are exempted but for which a 'national regime' still applies.
  1.3 Sources
  For this exploration, an analysis was made of almost 1,400 notification forms (out of the more than 2,400 notification forms submitted to the AFM since 2020).8 Additionally, data from our internal systems regarding the number of exemption notifications, signals, investigations, and measures linked to exempt providers was reviewed.9

2. Exemption Scheme
   2.1 Background
   The Prospectus Regulation offers Member States the possibility to exempt offerings up to €8 million. Companies have a legal obligation to draw up a prospectus and have it approved by the AFM if they offer securities to the public or admit them to trading on a trading platform.10 This prospectus describes, among other things, what the company does, what kind of securities they are, and describes the risks associated with owning the securities. Prospectuses are often large documents and are created with the help of (often) external service providers, such as lawyers. Additionally, we charge fees for approving a prospectus. Because for small offerings the costs associated with drawing up and approving a prospectus are disproportionate to the expected revenue, the Prospectus Regulation provides an exemption for such offerings. This aims to facilitate access to public capital for small and medium-sized enterprises. Offerings up to €1 million are in any case exempted.11 Member States can choose an exemption limit between €1 million and €8 million.
   2.2 Exemption Scheme
   In the Netherlands, an exemption limit of €5 million was chosen, calculated over a period of 12 months and per category of security. For the application thereof, the value of the offerings of group companies connected in a group is added up. This means that the same maximum total counter-value applies to a group of companies as to a single company. This aims to prevent the €5 million limit from being exceeded by offering securities from different companies. A number of conditions are attached to this '€5 million exemption':

• Prior to the offering, the offering must be notified to the AFM.12 For this, the provider must use a notification form. Through this notification obligation, we have visibility of the offerings made under the exemption.
• The provider must make a legally prescribed information document available to investors.13
  This information document helps investors better understand the costs, risks, and return of the investment and compare the security with other securities. The information in the information document must therefore also be balanced and understandable; and
• If securities are offered to private investors, the provider of these securities must state in advertising and documents in which the offering is presented that the provider does not have a prospectus approved by the AFM and that we do not exercise supervision on the offering.14
  The way the exemption is currently structured ensures that, although there is no obligation to publish a prospectus approved by the AFM, investors enjoy a certain degree of protection and the AFM has visibility of the market and can counter misuse. If a provider (or the group to which it belongs) exceeds the exemption limit or does not meet the above conditions, they violate the prospectus requirement and we can take measures. We can also take enforcement action against unfair commercial practices (see paragraph 2.4). With the EU Listing Act, the exemption scheme will look different. This is discussed in Chapter 5 of this publication.
  2.3 Exceptions
  In a number of cases, offerings are exempted from the prospectus requirement in advance (regardless of the size of the offering). This is the case, for example, with:
• An offering to only professional investors;
• An offering to fewer than 150 (legal) persons per Member State; and
• An offering of securities where each security has a nominal value of at least €100,000 and/or an offering of securities where each investor must buy at least €100,000 in securities.
  Although offerings under €1 million are also exempted in advance, the Netherlands has decided to establish a 'national regime' for these offerings. This aligns with the exemption scheme described above for offerings under €5 million.15
  2.4 Unfair Commercial Practices
  Exempt offerings are indeed exempt from the prospectus requirement, but the Whc does apply. An exempt provider must, as a trader, adhere to the requirements regarding consumer protection and must not, for example, engage in unfair commercial practices.16 These include misleading or aggressive commercial practices. Unfair commercial practices may occur, for example, in the case of providing incorrect or misleading information or omitting essential information. The obligations of the Whc apply to all commercial practices of exempt providers towards consumers before, during, and after an agreement.

3. Market Landscape
   3.1 Size
   The AFM received an average of 300 exemption notifications per year between 2020 and 2024, with an estimated average total size of approximately €400 million per year. In the peak year 2022, we received 389 notifications with a total size of estimated €508 million. Since 2020, it is estimated that more than €2 billion in securities has been offered. Since the peak year 2022, the number of exempt offerings seems to be decreasing. However, it still concerns a very significant amount. See Graph 1. Graph 1: Number of exemption notifications and estimated total market size per year.1718 Estimated total size (in millions of euros) 2020: 223 2021: 353 2022: 389 2023: 322 2024: 222 2025: 114 Many offerings have a (very) limited size, and there are also relatively many offerings with a total size between €4.9 and €5 million (just below the exemption limit). These offerings represent more than 25% of the total market size. The average size per offering is €1.3 million. The mode and median are, however, much lower: €500,000.19 Graph 2 shows the number of offerings within each bandwidth of €100,000 and the total size of the offerings within that bandwidth. Graph 2: Size per offering20 The number of offerings and the total size of these offerings per step of €100,000 (size per offering). Total size (in millions of euros) Number of offerings Size per offering (in millions of euros, in steps of €100,000) 0.0-0.1, 0.5-0.6, 1.0-1.1, 1.5-1.6, 2.0-2.1, 2.5-2.6, 3.0-3.1, 3.5-3.6, 4.0-4.1, 4.5-4.6, 4.9-5.0 Total size 0, 50, 100, 150, 200, 250, 300, 350 Number of offerings 0, 50, 100, 150, 200, 250, 300, 350, 400, 450 20 Offerings with a size of more than €5 million are not included in the graph.
   3.2 Characteristics
   Nearly 85% of the offerings are (also) directed at non-professional investors. 40% of the offerings are exclusively directed at non-professional investors. See Graph 3.
   Graph 3: Target group of exempt offerings
   The number of offerings per type of investor expressed as a percentage of the total number of offerings (where the type of investor is filled in). Percentage of total Existing circle of investors: 2.8% Both professional and non-professional investors: 39.9% Non-professional investors: 44.8% Professional investors: 12.8% In more than 50% of the offerings, 'bond' stands in the name of the offered product. These offerings represent 56% of the total size of all offerings. Notably, the name of the product often does not correspond to the type of security that providers fill in in the notification form. See Graph 4. According to that data, participations would represent 56.9% of the total market size, followed by convertible warrants (25.2%), and bonds or comparable debt instruments would represent only 6.9%. Graph 4: Type of security offered The size of the offerings per type of security expressed as a percentage of the total size of all offerings.21 Percentage of total size 0%, 10%, 20%, 30%, 40%, 50%, 60% Other negotiable right: 3.4% Certificate of share (without voting rights): 3.1% Nothing checked: 2.8% Other negotiable warrant: 1.4% Share: 0.3% Bond or comparable debt instrument: 6.9% Convertible warrant: 25.2% Participations: 56.9% 21 Offerings with a size greater than €5 million are not included in the graph. At least 39% of the funds raised are invested in assets, namely real estate (22%), land (6%), financial instruments (5%), wine/whiskey (3%), shipping (2%), crypto (1%), and precious metals (<1%) (see Graph 5). Within the sectors 'sustainable energy' and 'other sustainable initiatives' (together 36%)