Investor Protection on Crowdbase
Regulation is an integral part of the financial industry, which helps safeguard investors from fraudulent practices by unethical professionals.
Financial regulation protects investors
Investors benefit from financial regulation as it helps ensure that financial service providers operate ethically and transparently.
The financial system is a critical component of our everyday lives, as it impacts our ability to save, invest, borrow, and make long-term financial decisions. With weak controls in place, financial services firms have very little stopping them from harming investors and undermining the financial system’s stability. Financial regulation serves to prevent undesirable outcomes, and in case they do happen, it helps provide a safety net for investors.
Safekeeping of client assets
Crowdbase must hold clients’ assets separately from its own assets, ensuring they are protected and easily identifiable.
When you invest in a campaign through Crowdbase, your funds go directly into our “Clients’ Funds” account at a reputable financial institution, Eurobank Cyprus. This account is separate from other Crowdbase accounts and has stricter controls in place for withdrawals.
Crowdbase is not allowed to touch those funds for any other purpose other than 1. Transferring the funds to the company that successfully completed its campaign through Crowdbase, or 2. Returning it back to investors if the campaign is unsuccessful or if they asked for a refund on their investment.
Unlike other financial services companies you might have heard about in the news, Crowdbase does not invest clients’ funds. Your funds are safely kept in Euros, €1 for €1, at all times.
Investor Compensation Fund (ICF)
The objective of the ICF is to cover investors against investment firms in case they are unable to pay them back what they are owed.
The Investor Compensation Fund safeguards against administrative malpractice, fraud, or business failure of regulated financial services firms like Crowdbase. In case Crowdbase cannot pay back its investors what they are owed, they are entitled to compensation by the ICF equal to 90% of their net loss, up to a maximum of €20,000.
Keep in mind that, in case of poor investment performance in a financial instrument through Crowdbase, investors are not entitled to compensation by the ICF.
The Investor Compensation Fund was established by Crowdbase’s regulator, Cyprus Securities and Exchange Commission, according to Directive 97/9/EC, which requires all European competent authorities to have an investor compensation scheme in place to protect retail investors in the event of an investment firm’s failure. Crucially, the scheme protects investors irrespective of their country of residence.
Appropriateness of investment products
Crowdbase must assess each individual investor’s situation and warn them from taking excessive investment risks.
As a regulated entity, Crowdbase must make sure that investors understand the risks associated with each investment on the platform and that they have the financial capacity to handle these risks.
The second step in our onboarding process, the Investor Questionnaire, helps Crowdbase understand each investor’s individual economic situation. This forms a solid base for us to be able to present to you the necessary risk warnings before you make an investment through our platform.
Although Crowdbase may provide risk warnings for the appropriateness of your investment, we cannot restrict you from investing in an unsuitable product if you still wish to do so.
Key Investment Information Sheet (KIIS)
The KIIS offers a clear and easy-to-understand summary of critical information about each crowdfunding campaign in a standardised format.
The KIIS is an important tool for promoting investor protection and transparency. The EU Crowdfunding Regulation requires project owners to provide standardised information about crowdfunding opportunities, ensuring that investors have a clear understanding of the risks and potential rewards of their investments.
Under the EU Crowdfunding Regulation, investors are required to confirm that they have received and understood the KIIS before making an investment. The KIIS is a legally binding document, and can serve as evidence in legal disputes.
The KIIS for each campaign on Crowdbase can be found in the Deal Terms section on the right hand side of the campaign page, or under the Documents tab of the campaign page.