General requirements
1. Crowdfunding service providers that have established and operate a contingency fund for their activities relating to the individual portfolio management of loans shall have in place adequate policies and procedures and organisational arrangements to ensure that the contingency fund is managed prudently and can fulfil its objectives.
2. For the purposes of paragraph 1, the policies, procedures and organisational arrangements relating to the contingency fund shall be approved by the management body of the crowdfunding service provider and shall be in written form, updated, and well documented.
Organisational arrangements
1. Crowdfunding service providers shall ensure a robust and transparent organisational and operational structure for any contingency fund they may have in place and shall have a written description of it.
2. The management body of crowdfunding service providers shall oversee the implementation of the governance and organisational arrangements of the contingency fund.
3. For the purposes of paragraph 2, all the members of the management body of crowdfunding service providers shall:
(a)
have full knowledge of the legal, organisational and operational structure of the contingency fund and ensure that that structure is in line with its approved purposes;
(b)
be fully aware of the structure, responsibilities and the division of tasks within the contingency fund.
4. The organisational structure of the fund shall not impede the ability of the management body to identify, oversee and manage effectively the risks that the fund will face as a result of its operations.
Governance policy
1. Crowdfunding service providers shall have in place a governance policy to govern the contingency fund. That policy shall ensure that internal governance arrangements, processes and mechanisms are consistent, well integrated and adequate to ensure the well-functioning of the contingency fund.
2. The governance policy referred to in paragraph 1 shall contain all of the following elements and information:
(a)
the purpose of the contingency fund;
(b)
the legal and operational structure of the contingency fund, including whether it is operated by the crowdfunding service provider itself or by a third party;
(c)
the duration of the contingency fund, including cases in which the fund has an unlimited term.
3. In the event that the contingency fund is operated by a third party, the governance policy referred to in paragraph 1 shall also contain all of the following:
(a)
the composition of the management body of the contingency fund;
(b)
the responsibilities and duties of the management body of the contingency fund;
(c)
a description of the competences and skills of each member of the management body of the contingency fund;
(d)
the frequency of the meetings of the management body of the contingency fund;
(e)
the reporting requirements between the management body of the contingency fund and the management body of the crowdfunding service provider;
(f)
the responsibilities for the documentation, management and control of the outsourcing arrangements;
(g)
the identification of one or more senior staff members who are directly accountable to the management body of the crowdfunding service provider and responsible for managing and overseeing the risks of outsourcing arrangements, including the respective documentation.
Funding policy
1. The crowdfunding service provider shall have in place a funding policy to determine how the contingency fund is financed and how the proceeds collected are managed.
2. For the purpose of paragraph 1, the funding policy referred to in paragraph 1 shall contain all of the following elements and information:
(a)
any initial contribution made by the crowdfunding service provider into the contingency fund;
(b)
the type of fees that are collected for accruing the contingency fund;
(c)
the criteria the contingency fund management takes into account when deciding the type of fees to be levied;
(d)
the criteria the contingency fund management takes into account when deciding the amount of fees to be levied for each loan;
(e)
the decision-making process to determine the amount and nature of fees to be levied;
(f)
the investment strategy adopted by the contingency fund for investing the funds under management;
(g)
the legal ownership of the funds;
(h)
how the funds will be dissolved in the event of the maturity of the contingency fund;
(i)
how the funds are segregated from other assets owned by the crowdfunding service provider;
(j)
how the money paid into the contingency fund will be treated in the event of the insolvency of the contingency fund operator.
Disbursement policy
The crowdfunding service provider shall have in place a policy to determine how all of the following elements are considered in the decision on proceeding to any disbursement from the contingency fund to investors:
(a)
updated available fund balance;
(b)
the share of the loans that have defaulted in a given portfolio;
(c)
the interest rates and maturity of the loans that have defaulted in a given portfolio;
(d)
the procedure to be followed when considering whether to make a discretionary payment from the contingency fund;
(e)
the circumstances in which the contingency fund may be activated for the pay-out;
(f)
the criteria to be considered in the event of competing or simultaneous claims of investors on the same defaulted loans.
Business continuity policy
Crowdfunding service providers shall establish a sound business continuity policy for the contingency fund to ensure its ability to operate on an ongoing basis and to limit possible losses in the event of temporary or definitive failure.
Transparency and disclosure to investors
1. The management body of the crowdfunding service provider shall inform and update its staff about the contingency fund’s policies and procedures in a clear and consistent way, at least to the level needed to carry out the duties of the contingency fund.
2. The policies, procedures and organisational arrangements that the crowdfunding service provider shall have in place in accordance with Article 6(7), point (c) of Regulation (EU) 2020/1503 shall be consistently reflected in the contingency fund policy referred to in Article 6(5), point (b), of that Regulation.
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
