Consultation Paper on the amendments to the AIFC Crowdfunding Platforms Framework
IINTRODUCTION
Why are we issuing this Consultation Paper (CP)?
1. The Astana Financial Services Authority (AFSA) has issued this Consultation Paper
to seek views on our proposed amendments to the Crowdfunding Platforms
Framework.
Who should read this CP?
2. The proposals in this paper will be of interest to Crowdfunding Platforms, Authorised
Persons, all users of Crowdfunding Platforms and any other interested stakeholders.
Terminology
3. Defined terms have the initial letter of the word capitalised, or of each word in a
phrase. Definitions are set out in AIFC Glossary. Unless the context otherwise
requires, where capitalisation of the initial letter is not used, the expression has its
natural meaning.
What are the next steps?
4. We invite comments from interested stakeholders on the proposed framework. All
comments should be in writing and sent to the email specified below. When sending
your comments by email, please use “Consultation Paper AFSA-P-CE-2025-0003” in
the subject line. You may, if relevant, identify the organisation you represent when
providing your comments. AFSA reserves the right to publish, including onits website,
any comments you provide, unless you expressly request otherwise. Comments
supported by reasoning and evidence will be given more weight by the AFSA.
5. The deadline for providing comments on the proposed framework is 15 September
2025. Once we receive your comments, we shall consider if any refinements are
required to this proposal.
6. Following the public consultation, we may proceed with making relevant changes to
the AIFC Acts as appropriate to reflect the points raised in the consultation. You
should not act on the proposals until the framework is enacted.
7. The AFSA prefers to receive comments by email at consultation@afsa.kz.
Structure of this CP
Part I – Background
Part II – Legislative Proposals
Part III – Public Consultation Questions
Annex 1 – Proposed Amendments to AIFC Rules
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PART I – BACKGROUND
The AIFC Crowdfunding Market
1. In 2019, the AFSA introduced the first dedicated regulatory framework in the
Central Asian region for loan- and investment-based crowdfunding platforms,
developed with the support by the European Bank for Reconstruction and
Development (EBRD). The framework was designed to provide alternative
financing channels for SMEs and start-ups by facilitating access to capital
through online platforms. Recognising the potential of crowdfunding to support
entrepreneurial activity, economic growth, and financial inclusion, the AFSA
positioned this initiative as part of its broader commitment to financial innovation,
while maintaining high standards of investor protection and market integrity.
2. Although the regulatory framework for crowdfunding activities in the AIFC had
been in place from an early stage, most platforms initially entered the market
through the AFSA FinTech Lab, which served as a controlled environment for
testing innovative business models under a limited licence. This approach
allowed firms to demonstrate the viability of their models while contributing to
the refinement of the broader regulatory framework. While most crowdfunding
platforms followed this sandbox pathway, one firm was authorised directly under
the full regulatory regime from the outset, without undergoing the testing phase.
3. Based on the experience gained through the sandbox and the increasing
maturity of the sector, the AFSA concluded in 2023 that the regulatory
environment was sufficiently developed to support direct entry into the market.
As a result, new applicants for crowdfunding licences were encouraged to apply
directly for full authorisation under the full regime, without prior participation in
the sandbox. This transition reflects the successful evolution of crowdfunding
regulation in the AIFC and the integration of crowdfunding into the broader
financial services landscape.
4. As of now, two crowdfunding platforms operate under the full regulatory regime
in the AIFC, one of which obtained full authorisation after participating in the
FinTech Lab. Two additional platforms continue to operate under the sandbox
regime with limited licences. This reflects the transitional nature of the sector,
where both fully authorised platforms and those in the testing phase are active.
Need for regulatory enhancement
5. While the continued growth of the crowdfunding sector demonstrates its
potential as an alternative financing tool, it has also revealed regulatory and
operational challenges that affect investor confidence and platform
performance. Feedback received from users of existing platforms pointed to
gaps in areas such as transparency, disclosure quality, and alignment of
platform conduct with investor expectations. In light of the issues observed in
platform practices and investor experience, the AFSA identified the revision of
the crowdfunding regulatory framework as a policy priority for 2025.
International Context
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6. The proposals draw on regulatory developments in comparable jurisdictions,
particularly the Dubai International Financial Centre (DIFC). The amendments
also reflect global best practices established by regulators including the UK's
Financial Conduct Authority and the ADGM’s Financial Services Regulatory
Authority.
PART II – LEGISLATIVE PROPOSALS
A. Harmonisation of Client Classification and Suitability Assessment
Proposed changes
7. The proposed amendments to AMI rules 7.3.1, 7.3.5, 7.3.7, 7.3.23, and 7.3.24,
along with COB 1.2.2, harmonise client classification terminology within the
AIFC crowdfunding regulatory framework by replacing sector-specific
designations of "Retail Lender", "Retail Investor", "Accredited Lender" and
"Accredited Investor" with the standardised categories of "Retail Client" and
"Professional Client" used throughout the broader AIFC regulatory system. This
harmonisation eliminates terminology inconsistencies that have created
regulatory complexity while aligning crowdfunding platform client classification
with the established AIFC regulatory framework. The amendments aim at
enhancing regulatory coherence while maintaining appropriate client protection
levels through consistent application of suitability and disclosure requirements.
8. Furthermore, the AFSA proposes to introduce a new requirement to ensure
crowdfunding platforms carry out a dedicated suitability assessment for retail
clients. To strengthen the existing framework and given the standardised client
classification framework introduced for crowdfunding regulations, the AMI Rules
will be amended to explicitly require platforms to assess retail clients to ensure
they understand both the risks and suitability of the products and services
offered. This assessment should encompass evaluating the client's investment
knowledge and previous experience with similar financial products, their current
financial circumstances including income stability and existing financial
commitments, their stated investment objectives, and risk tolerance.
B. Strengthened Due Diligence and Permitting Sole Proprietors
Proposed changes
9. Recognising the need for more robust due diligence, the AFSA proposes
expanding requirements under AMI 7.3.6 “Due diligence on Borrowers or
Issuers” include a broader set of criteria assessing the issuer's or borrower's
integrity, financial soundness, and operational legitimacy. Specifically, platforms
would be required to evaluate fitness and propriety, financial strength (including
review of financial statements and credit history), claimed credentials, business
valuation and funding status, the credibility of the business proposal,
management commitment and potential flight risk, legal compliance in the
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relevant jurisdiction, and any other information deemed necessary by the AFSA
to assess risk and suitability.
10.The proposed amendments will strengthen safeguards against financial, legal,
or reputational risks through refined due diligence processes. In addition to the
proposed enhancements to minimum due diligence standards, a separate
provision has been included to explicitly reserve that AFSA may direct
Authorised Crowdfunding Platforms to amend their due diligence procedures.
This ensures that, beyond baseline requirements, the AFSA retains the ability
to intervene where necessary to address evolving risks or concerns arising from
supervisory review.
11.Additionally, it is proposed to allow sole proprietors to use services of
crowdfunding platforms as borrowers and issuers, contingent upon the AFSA
approval. This provision introduces a conditional framework that would expand
eligibility beyond the current Body Corporate requirement while maintaining
regulatory oversight through the AFSA's discretionary approval process. The
proposed change builds on the existing class modification previously granted by
the AFSA, which permits such participation under specific conditions.
12.The suggested amendment acknowledges the potential market demand for sole
proprietor participation in crowdfunding while recognising the need for
appropriate regulatory safeguards and supervisory conditions to address the
distinct risk profile of individual entrepreneurs compared to incorporated entities.
Market data supports this expansion, as the overwhelming majority of active
SME entities in Kazakhstan are individual entrepreneurs (sole proprietors),
comprising 69.7% (1.4 million) of the total. This demonstrates that restricting
crowdfunding access to Body Corporates alone excludes the largest segment
of the SME market, potentially limiting the sector's growth and access to
alternative financing mechanisms.
C. Enhanced Disclosure Framework for Defaults and Overdue Payments
Proposed changes
13.To strengthen investor protection while reflecting local market realities, the
AFSA proposes enhancing AMI 7.3.3 to improve transparency on loan and
investment defaults. Under the proposed enhancement, platforms would be
required to disclose default and delinquency data on a quarterly basis, within 10
days following the end of each quarter. The categorisation would focus on predefault delinquency statistics, ensuring early warning signals are captured. It is
also proposed to define default as loans more than 90 days past due.
14.Additionally, to enhance consistency and reliability in the calculation of expected
default or failure rates, the AFSA proposes adding guidance to clarify that the
assumptions used in determining these rates should be based on the
creditworthiness assessment framework under AMI 7.3.7(f) and reflect the
specific risk characteristics of loans offered through the platform.
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15.To prevent inconsistent or potentially misleading reporting, standardised default
ratios should be mandated across the industry. These should include: (a) the
actual default rate, calculated as a percentage of all loans originated through the
crowdfunding platform; and (b) the ratio of overdue principal amounts to the total
outstanding loan portfolio. Requiring both metrics would enhance clarity around
the volume and impact of defaults, providing investors and stakeholders with a
more accurate basis for risk assessment and decision-making.
16.Moreover, it is proposed to introduce a new provision under AMI 7.3.7
“Disclosure of information about the Borrower or Issuer” requiring Authorised
Crowdfunding Platform to disclose the historical information on each Borrower
or Issuer in relation to any overdue payments, defaults or failures, and the
relevant details of such events. This amendment enhances investor protection
by providing transparency regarding past performance patterns and enabling
more informed investment decisions based on the available data for risk
assessment.
17.In connection with these provisions, it is also proposed to simultaneously
strengthen AMI 7.3.4 “Information about the service and lender or Investor
education tools” and introduce enhanced requirement for crowdfunding platform
to disclose key information about how its service operates in relation to how and
when notification on defaults, failures, and overdue payments will be
communicated to clients. This requirement ensures that potential lenders and
investors are informed about notification protocols and are not left uninformed
about material developments affecting their investments. This enhanced
communication framework directly connects to AMI 7.3.10 “Material Changes”,
which establishes the foundational obligation for platforms to notify clients of
significant developments that may affect a borrower’s and issuer's ability to meet
payment obligations or carry out their business proposal.
D. Restriction on New Lending Proposals
Proposed changes
18.In addition to the enhanced disclosure framework for defaults, overdue
payments and failures, it is also proposed to introduce a new provision, which
requires loan crowdfunding platforms to restrict borrowers with existing payment
difficulties from accessing new lending opportunities. Under this provision,
platforms must not permit borrowers to use their services for new lending
proposals, where the borrower has any loans in default or with overdue
payments, until all payment obligations under the relevant loan agreements
have been fulfilled. This measure addresses the risk of borrowers accumulating
unsustainable debt levels by accessing multiple lending sources while in
financial distress and strengthens consumer protection by preventing potentially
harmful borrowing patterns.
19.The proposed restriction aligns with responsible lending expectations and
requires platforms to implement appropriate systems to monitor borrower
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payment performance across their loan portfolios. The AFSA expects this
measure to reduce credit risk for lenders while protecting vulnerable borrowers
from over-indebtedness.
E. Enforcing Creditworthiness Grading Standards
Proposed changes
20.The AFSA proposes to clarify that platforms are expected to produce
creditworthiness assessments, addressing previous inconsistencies in
the application of this requirement. Furthermore, this refinement should help
ensure that the expected default rates disclosed are based on more objective
assumptions and methodologies.
21.To that end, it is also proposed to introduce a new clause authorising the AFSA
to require amendments to a platform’s grading or rating assessment framework
under AMI 7.3.7(f). This addition would provide the necessary regulatory tool to
intervene where credit assessment methodologies may be insufficient, unclear,
or inconsistent with investor protection objectives, helping to align market
practices with supervisory expectations.
F. New Lending and Investment limits for Retail Clients
Proposed changes
22.Given the elevated risk profile inherent in crowdfunding platform offerings,
differentiated regulatory limits are needed to enhance retail client protection. It
is suggested to implement an additional annual calendar limit for the retail clients
at the AIFC of USD 50,000 per crowdfunding platform, supplementing existing
per borrower and issuer restrictions. This dual-limit structure would provide
enhanced risk mitigation. The proposed annual calendar limit is based on
observed retail client investment patterns, with an average investment amount
and the need for retail clients to diversify their portfolios within the limit.
G. Improving Financial Literacy and Education via Enhanced Risk Disclosure
Proposed changes
23.The revised framework introduces clearer language regarding investment risks,
stating that investing in Permitted Loans or Permitted Investments involves risks
where lenders or investors may lose all or part of their money or experience
payment delays. The amendments separate disclosure of new business risks
into a distinct provision, while maintaining emphasis on the elevated risk profile
of borrowers and Issuers who may apply funds to higher-risk activities.
24.The enhanced disclosure framework introduces two critical new provisions
addressing protection gaps and leveraged investment risks. Platforms ought to
explicitly disclose that Permitted Loans or Permitted Investments lack protection
from deposit guarantee schemes, investor compensation schemes, or any other
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form of guarantee, with potential for partial or total capital loss. Additionally,
platforms must warn clients about the amplified risks associated with using credit
or borrowed money for crowdfunding investments, emphasising that repayment
obligations persist regardless of investment performance or loan recovery
outcomes.
25.Additionally, AMI 7.3.5 “Risk acknowledgement form”, is proposed to strengthen
the form by allowing the AFSA to mandate additional information requirements
for risk acknowledgement forms beyond the currently specified risk disclosures.
This expands the AFSA's authority to require supplementary disclosures in risk
acknowledgement forms as needed, providing regulatory flexibility to address
emerging risks or compliance gaps.
H. Excluding a Providing Private Financing Platform licence
Proposed changes
26.Comparative analysis with the ADGM reveals that the definition of Operating a
Private Financing Platform contains several elements that overlap substantially
with the Market Activity of Operating a Loan and Investment Crowdfunding
Platform, which is already subject to comprehensive regulation within the AIFC.
Notably, ADGM does not maintain separate licensing categories for Operating
a Loan/Investment Crowdfunding Platform, instead incorporating such activities
under its Private Financing Platform framework. This jurisdictional difference
highlights the potential for regulatory duplication and inconsistency.
27.Previous market requests around Private Financing Platform licence have
revealed significant uncertainty and ambiguity, rather than clear demand.
Stakeholders have raised recurring questions regarding the scope, distinction,
and practical application of this licence, indicating a lack of shared
understanding rather than a defined market need. Given the existing overlap
with established crowdfunding regulations, it is suggested to exclude the Private
Financing Platform licence from the regulatory framework from GEN 1.2 and
GEN’s Schedule 4 (6).
I. Technical corrections
Proposed changes
28.Several typographical errors have been identified within AMI 7.3.22 and AMI
7.3.3 that require correction to ensure regulatory clarity and consistency. These
errors, while minor in nature, may create ambiguity in regulatory interpretation
and compliance requirements for market participants. It is proposed that these
typographical errors are corrected to eliminate potential confusion and maintain
the high standards expected of regulatory documentation within the AIFC
framework.
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PART III – PUBLIC CONSULTATION QUESTIONS
Question 1: Do you agree with the proposed simplification of client classification
terminology, replacing "Retail Lender/Retail Investor" and "Accredited
Lender/Accredited Investor" with the standard "Retail Client" and "Professional Client
or Market Counterparty" categories?
Question 2: Do you agree with the proposed expansion of risk disclosures to include
disclosure on "any other electronic medium through which services can be accessed"
beyond just websites? Are there practical implementation challenges with this
requirement?
Question 3: Do you support the addition of new mandatory risk disclosures? Are these
disclosures sufficient to ensure investor’s understanding?
Question 4: Do you agree with the proposed detailed breakdown of overdue payment
categories for loan crowdfunding platforms? Is this level of granularity appropriate and
useful for investor decision-making?
Question 5: Do you support quarterly reporting requirements for default and overdue
payment statistics? What concerns, if any, do you have regarding the implementation
of quarterly reporting requirements for default and overdue payment statistics?
Question 6: Do you agree with the significantly expanded due diligence requirements
for borrowers and issuers?
Question 7: Do you support allowing sole proprietors to use crowdfunding platforms,
subject to the AFSA approval and conditions? If not, please explain your concerns.
Question 8: Do you agree with our proposal to introduce an annual calendar limit of
USD 50,000 per crowdfunding platform for retail clients?
Question 9: Do you agree with the complete removal of "Operating a Private
Financing Platform" as a Market Activity? If not, please explain your concerns.
Question 10: In your view, what would be a reasonable implementation timeline for
these amendments, considering the operational changes that may be required for
existing platforms?
Question 11: In your view, are there any additional safeguards or requirements that
should be included in the crowdfunding framework that are not addressed in these
amendments?
Question 12: Do you have any other comments on the proposed amendments to the
AIFC Crowdfunding Platforms Framework?
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Annex 1
to the Consultation Paper on
Amendments to the AIFC
Crowdfunding Platforms
Framework
PROPOSED AMENDMENTS TO AIFC RULES
In these amendments, underlining indicates a new text and strikethrough indicates a
removed text.
AIFC AUTHORISED MARKET INSTITUTION RULES
(…)
7. RULES APPLICABLE TO AN AUTHORISED CROWDFUNDING PLATFORM
(…)
7.3. Requirements for Authorised Crowdfunding Platforms
7.3.1 Clients of an Authorised Crowdfunding Platform
(1) Both Borrowers and lenders (in the case of a Loan Crowdfunding Platform) and
Issuers and Investors (in the case of an Investment Crowdfunding Platform) will be
Clients of an Authorised Crowdfunding Platform.
(2) An Authorised Crowdfunding Platform must classify Clients lenders and Investors
as being in one of the following categories:
(a) a Retail Lender or Retail Investor a Retail Client; or
(b) an Accredited Lender or Accredited Investor a Professional Client.
(3) An Authorised Crowdfunding Platform must notify a new Client of its classification
in accordance with AMI 7.3.1(2) in respect of the services provided by it to that
Client.
(3-1) An Authorised Crowdfunding Platform must take reasonable steps to ensure that
Permitted Loan or Permitted Investment is suitable for the Retail Client. For this
purpose, the Authorised Crowdfunding Platform must undertake an appropriate
assessment of the particular Retail Client’s needs and objectives, knowledge,
experience and financial situation, and also, to the extent relevant, risk tolerance,
and understanding of the risks involved.
(4) An Authorised Crowdfunding Platform must classify as a Retail Lender or Retail
Investor any Client that is not an Accredited Lender or Accredited Investor.
[intentionally omitted]
(5) For the purposes of AMI 7, “Accredited Lender or Accredited Investor” means:
[intentionally omitted]
(a) in respect of a Loan Crowdfunding Platform, any natural person who lends
or intends to lend for a total consideration of at least USD100,000 (or an
equivalent amount in another currency) per Borrower across one or more
Permitted Loans in any 12-month period; or
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(b) in respect of an Investment Crowdfunding Platform, any natural person who
acquires or intends to acquire Permitted Investments for a total
consideration of at least USD 100,000 (or an equivalent amount in another
currency) per Issuer across one or more offers in any 12-month period; or
(c) an Authorised Person; or
(d) a Body Corporate.
7.3.2 Crowdfunding risk disclosure
(1) An Authorised Crowdfunding Platform must disclose prominently on its website and
on any other electronic medium through which its services can be accessed the
main risks to lenders or Investors using a Crowdfunding Platform, including (as
applicable) that:
(a) Borrowers or Issuers using the Authorised Crowdfunding Platform may
include new businesses and, as many new businesses fail, a loan to such
a Borrower or an Investment with such an Issuer may involve high risks,
including the loss of investing in Permitted Loans or Permitted Investments
through the Crowdfunding Platform involves risks, and the lender or
Investor may lose all or part of the lender or Investor's their money, or
experience delays in payment or the realization of gains in being paid;
(a-1) Borrowers or Issuers using the Crowdfunding Platform may include new
businesses and, as many new businesses fail, a loan to such a Borrower
or an Investment with such an Issuer may involve high risks;
(b) Borrowers or Issuers on the Crowdfunding Platform may apply funds
borrowed to higher risk activities or investments (for example, to a
prospective investments in a property development) and, consequently, a
loan to such a Borrower or a Permitted Investment an Investment with such
an Issuer may involve high risks;
(c) failure to diversify a portfolio of Permitted Loans or Permitted Investments
may lead to greater losses in the event of the default of a relevant Borrower
or Issuer;
(d) the lender may not be able to transfer their Permitted Loans or the Investor
may not be able to sell their Permitted Investment when they wish to, or at
all; and
(e) if for any reason the Authorised Crowdfunding Platform ceases to carry on
its business, the lender or Investor may lose their money, incur costs or
experience delays in being paid;
(f) Permitted Loans or Permitted Investments are not protected by any deposit
guarantee scheme or investor compensation scheme, or any other form of
guarantee, and the lender or Investor may lose all or part of their money;
and
(g) the use of credit or borrowed money to invest or lend on the Crowdfunding
Platform creates greater risk. For example, even if the loan or Investment
is not repaid or declines in value, the lender or Investor will still need to
meet their repayment obligations.
(2) The disclosure referred to in (1) must be presented in a way that is fair, clear and
not misleading.
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7.3.3 Information about default or failure rates
(1) An Authorised Crowdfunding Platform must disclose prominently on its website and
on any other electronic medium through which its services can be accessed (as
applicable):
(a) for a Loan Crowdfunding Platform, the actual and expected default rates for
Permitted Loans entered into on the Authorised Crowdfunding Platform;
and:
(i) the number and aggregate value of loans in default;
(ii) the actual default rates as a percentage of loans entered into on the
Crowdfunding Platform;
(iii) the total principal amount of loans in default as a percentage of all
outstanding loans on the Crowdfunding Platform;
(iv) the expected default rates; and
(b) for an Investment Crowdfunding Platform, the actual and expected failure
rate of Permitted Investments Issuers who use the Authorised
Crowdfunding Platform.
(2) The information referred to in (1) must:
(a) for actual default or failure rates, cover the period since the Authorised
Crowdfunding Platform began providing the service;
(b) for expected default or failure rates, set out a summary of the assumptions
used in determining those expected rates; and
(c) be presented in a way that is fair, clear and not misleading.
(3) Where an Authorised Crowdfunding Platform is within its first 12 months of
operation, it does not need to disclose actual default or failure rates if no such data
is yet available. Where no such data is available during this period, an Authorised
Crowdfunding Platform shall disclose that no historic data is available and all
default or failure rates disclosed are expected default or failure rates only.
(4) For the purposes of AMI 7, a Loan Crowdfunding Platform shall treat loans that are
over 90 days past the due date as being in default, with the number of days past
due measured from the earliest contractual due date on which a payment is due
but has not been made.
(5) A Loan Crowdfunding Platform must, in addition to the information referred to in
(1), disclose prominently on its website and on any other electronic medium
through which its services can be accessed, the total number of loans entered into
on the Crowdfunding Platform for which repayment has not been made by the due
date, and include a breakdown of overdue payments according to the following
categories:
(a) 30 days or less past the due date;
(b) 31 to 59 days past the due date;
(c) 60 to 90 days past the due date;
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(d) more than 90 days past the due date, as defined in (4) as being in default.
(6) Save where the AFSA otherwise directs, the disclosures required under AMI 7.3.3
must be disclosed as at the end of each quarter of a calendar year and updated
within 10 days after the end of each relevant quarter.
(7) The AFSA may by written notice require an Authorised Crowdfunding Platform to
disclose additional information on actual and expected default by a Borrower or
failure of an Issuer.
Guidance
(1) AMI 7.3.3 requires a Loan Crowdfunding Platform to disclose historical information
about the default rates of loans entered into on Crowdfunding Platform. It also
requires the Crowdfunding Platform to set out expected default rates in the future
for loans entered into on the Crowdfunding Platform.
(2) An Investment Crowdfunding Platform is required to disclose similar information
about the failure rates of Issuers on its platform. In this context, failure of an Issuer
should include where an Issuer defaults on payments, becomes insolvent, is
wound up or ceases to carry on business.
(3) Information about default and failure rates is intended to assist potential lenders or
Investors to assess the risks of lending or investing using the Crowdfunding
Platform.
(4) The assumptions used in determining the expected default or failure rates under
AMI 7.3.3(1) should be based on the creditworthiness assessment framework
under AMI 7.3.7(f) and reflect the specific risk characteristics of loans offered
through the platform.
(5) In order to meet the requirements in AMI 7.3.3 (5), the Loan Crowdfunding Platform
should measure the number of days past the due date from the earliest contractual
date on which a payment is due but has not been made.
7.3.4 Information about the service and lender or Investor education tools
(1) An Authorised Crowdfunding Platform must disclose prominently on its website in
a way that is fair, clear and not misleading key information about how its service
operates (as applicable), including:
(a) details of how the Authorised Crowdfunding Platform functions;
(b) details of how and by whom an Authorised Crowdfunding Platform is
remunerated for the service it provides, including fees and charges it
imposes;
(c) any financial interest of an Authorised Crowdfunding Platform or a Related
Person that may create a conflict of interest;
(d) the eligibility criteria for Borrowers or Issuers that use the service;
(e) the minimum and maximum amounts, if any, of Permitted Loans or
Permitted Investments that may be sought by a Borrower or an Issuer using
the service;
(f) what, if any, security or collateral is usually sought from Borrowers or
Issuers, when might rights to enforce such security or apply such collateral
be exercised and any limitations in connection therewith;
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(g) the eligibility criteria for lenders or Investors that use the service;
(h) any limits on the amounts a lender may lend or an Investor may invest using
the service, including limits for individual Permitted Loans or Permitted
Investments and limits that apply over any 12-month period;
(i) when a lender or Investor may withdraw a commitment to provide funding,
and the procedure for exercising such a right;
(j) what will happen if Permitted Loans sought by a Borrower or funds sought
by an Issuer either fail to meet, or exceed, the target level;
(k) steps an Authorised Crowdfunding Platform will take if there is a material
change in a Borrower's or Issuer's circumstances and the rights of the
lender and Borrower or Issuer and Investor in that situation;
(l) how an Authorised Crowdfunding Platform will deal with overdue payments
or a default by a Borrower, or failure of an Issuer, including how an
Authorised Crowdfunding Platform will notify lenders or Investors of such
events, and the timing and means of such notification;
(m) which jurisdiction's laws will govern the loan agreement between the lender
and Borrower or the Investment between Investor and Issuer;
(n) arrangements and safeguards for Client Assets held or controlled by an
Authorised Crowdfunding Platform, including details of any legal
arrangements (such as nominee companies) that may be used to hold
Client Assets;
(o) any facility an Authorised Crowdfunding Platform provides to facilitate the
transfer of Permitted Loans or sale of Permitted Investments, the conditions
for using the facility and any risks relating to the use of that facility;
(p) measures the Authorised Crowdfunding Platform has in place to ensure the
Crowdfunding Platform is not used for money-laundering or other unlawful
activities;
(q) measures the Authorised Crowdfunding Platform has in place for the
security of information technology systems and data protection; and
(r) contingency arrangements the Authorised Crowdfunding Platform has in
place to ensure the orderly administration of Permitted Loans if it ceases to
carry on business.
(2) For the purposes of (1), "significant influence" refers to the ability to participate in,
direct, or otherwise control the operating decisions of an entity. The existence of
significant influence may be evidence in one or more of the following ways:
(a) representation on the board of directors or equivalent governing body of
the entity;
(b) participation in the policy or decision making process of the entity;
(c) material transactions between the entity and the person with influence;
(d) changes to managerial personnel directed by the person with influence; or
(e) the provision of otherwise sensitive information to the person with influence.
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(3) An Authorised Crowdfunding Platform must make available on its website one or
more interactive educational tools which are reasonably designed to promote
lender understanding of the services offered by the Authorised Crowdfunding
Platform, as further described in (1), and of the key risks of using these services,
as further described in AMI 7.3.2.
7.3.5 Risk acknowledgement form
(1) An Authorised Crowdfunding Platform must ensure that a Retail Lender or Retail
Investor Client provides a signed risk acknowledgement form for each Permitted
Loan or Permitted Investment (as applicable) that it makes using the platform.
(2) The risk acknowledgement form under (1) must:
(a) set out clearly the risks referred to in AMI 7.3.2, 7.3.4 and such other
information as the AFSA may prescribe;
(b) require the Retail Client to confirm that they he understands those risks;
and
(c) be provided before, or at the same time as, the Retail Lender or Retail
Investor Client commits to making the Permitted Loan or Permitted
Investment (as applicable).
7.3.6 Due diligence on Borrowers or Issuers
(1) An Authorised Crowdfunding Platform must not permit a Borrower or Issuer to use
its service unless the Borrower or Issuer is a Body Corporate or a sole proprietor,
provided that the AFSA has granted permission for the Authorised Crowdfunding
Platform to offer its services to sole proprietors, under such conditions as the AFSA
may specify.
(2) An Authorised Crowdfunding Platform must conduct due diligence on each
Borrower or Issuer before allowing it to use its service.
(3) The due diligence under (2) must include, as a minimum, taking reasonable steps
to verify in relation to the Borrower or Issuer (as applicable):
(a) its identity, including details of its incorporation and business registration;
and
(b) the identity and place of domicile of each of its Directors, officers and
Controllers.;
(c) its fitness and propriety and that of each of the Persons referred to in (b);
(d) its financial strength, based on the review of financial statements;
(e) its financial history and past performance and its credit history, including
checking with external credit agencies;
(f) any credentials or expertise it claims to have;
(g) the valuation of its business, current borrowing or funding levels (if any)
and the source of any existing borrowing or funding;
(h) its business proposal;
16
(i) its commitment and that of its Directors, officers and Controllers to the
business, including how much capital they have provided and any potential
flight risk;
(j) that its business is being carried on in accordance with applicable laws in
the jurisdiction where it is based;
(k) any other information necessary to assess the suitability and potential risk
associated with the Borrower or Issuer, as may be directed by the AFSA.
(4) The AFSA may by written notice, require an Authorised Crowdfunding Platform to
conduct additional due diligence on Borrowers and/or Issuers before such
Borrowers and/or Issuers are permitted to use the service provided by the
Authorised Crowdfunding Platform.
(5) The AFSA may require by written notice an Authorised Crowdfunding Platform to
make amendments to its due diligence process under (2) and (3) as prescribed by
the AFSA.
Guidance
(1) The type of background checks the AFSA expects an Authorised Crowdfunding
Platform to conduct under AMI 7.3.6 include, for example, whether the Person has
been:
(a) found guilty of a criminal offence;
(b) the subject of any finding in a civil proceeding of fraud, misfeasance or other
misconduct;
(c) the subject of a judgment or agreed settlement in a civil proceeding exceeding
$10,000;
(d) disqualified from acting as a director or taking part in the management of a
company; or
(f) bankrupt or the director, or a person concerned in the management, of a
company which has gone into liquidation or administration.
(2) The purpose of the due diligence under AMI 7.3.6(3)(j) is to check that the business
itself is lawful in the place in which it is being carried on i.e. that the owner has the
necessary permits and that the activity is lawful. The borrower or Issuer should
certify these matters and provide relevant documents where appropriate.
7.3.7 Disclosure of information about the Borrower or Issuer
(1) An Authorised Crowdfunding Platform must disclose prominently on its website
relevant information about each Borrower or Issuer, including as a minimum:
(a) the name of the Borrower or Issuer, the full name and position of each of
its Directors and officers and the full name of each Controller;
(b) the place of incorporation of the Borrower or Issuer and the place of
domicile of each Director, officer and Controller;
(c) a description of the Borrower or Issuer's business;
(d) a detailed description of the proposal for which it is seeking funding
including:
17
(i) the target level of funding sought and what will happen if that level
is not met or is exceeded; and
(ii) how the funds will be used.
(e) the results of any due diligence carried out by the Authorised Crowdfunding
Platform on the Borrower or Issuer and any limits on the due diligence that
could be carried out;
(f) the grading or rating by the Authorised Crowdfunding Platform of the
Borrower or Issuer's creditworthiness (if any), including:
(i) how the grading or rating has been assessed;
(ii) an explanation of what the different grading or rating levels mean;
and
(iii) a clear statement that this should not be taken as advice about
whether money should be lent to the Borrower or an Investment
should be made with the Issuer;
(f-1) the historical information on each Borrower or Issuer in relation to any
overdue payments, defaults or failures, and the relevant details of such events; and
(g) that the Borrower or Issuer, and information provided about the Borrower
or Issuer, are not checked or approved by the AFSA; and
(h) other disclosure documents that contain the necessary information which
is material to Retail Investors or Retail Lenders Clients for making an informed
investment decision.
(2) The disclosures referred to in (1) must be presented in a way that is fair, clear and
not misleading.
(3) The AFSA may require by written notice an Authorised Crowdfunding Platform to
make amendments to its grading or rating assessment framework under (1)(f) as
prescribed by the AFSA.
7.3.8 Disclosure of information about the Permitted Loan or Permitted Investment
(1) An Authorised Crowdfunding Platform must disclose prominently on its website
relevant information about each Permitted Loan or Permitted Investment offered by
a Borrower or Issuer (as applicable), including as a minimum:
(a) for a Permitted Loan, the duration of the Permitted Loan, details of interest
payable and any other rights attaching to the Permitted Loan;
(b) for an issue of Permitted Investments, any rights attaching to the Permitted
Investments, such as a dividend, voting or pre-emption rights;
(c) whether any security is being provided and, if so, the details of that security
including the circumstances in which it might be exercised and any
limitations on its use;
(d) for a Permitted Loan, if applicable, any other reward or benefit attaching to
the Permitted Loan and the terms on which it is available; and
18
(e) for an issue of Permitted Investments, whether Investors have any
protection from their interest or holding being diluted by the issue of further
Permitted Investments.
(2) The disclosures referred to in (1) must be presented in a way that is fair, clear and
not misleading.
(…)
7.3.10-1 Restriction on new lending proposals
(1) A Loan Crowdfunding Platform must not permit a Borrower to use the
Crowdfunding Platform for new lending proposal where the Borrower has any loans
in default or with overdue payments, until the Borrower has fulfilled its payment
obligations under the relevant loan agreement.
(…)
7.3.22 Target funding amount
(1) An Authorised Crowdfunding Platform must ensure that all loan proceeds are only
provided to the Borrower or offering proceeds are only provided to the Investor
Issuer when the aggregate capital raised from all lenders or Investors is equal to or
greater than the target funding amount and allow all lenders or Investors to cancel
their commitments to lend or invest, as the AFSA shall determine appropriate.
7.3.23 Lending and Investment limits
(1) An Authorised Crowdfunding Platform must maintain effective systems and
controls to ensure that a Retail Lender or Retail Investor Client using its service
does not lend or invest, in respect of any single Borrower or Issuer and in aggregate
calculated over a period of 12 months, an amount which exceeds the greater of
more than:
(a) USD 2,000; or in respect of any single Borrower or Issuer and in aggregate
calculated over a period of 12 months, an amount which exceeds the greater
of:
(i) USD 2,000; or
(ii)the lesser of
- 10 percent of the annual income; or
- 5 percent of net worth of such Retail Lender or Retail Investor Client
(excluding the value of the primary residence)., up to a maximum
aggregate amount of USD100,000. and
(b) USD 50,000 in total in any calendar year using its service.
7.3.24 Fundraising limits
(1) An Authorised Crowdfunding Platform must maintain effective systems and
controls to ensure that:
(a) a Borrower does not borrow from:
(i) Retail Lenders Clients more than USD 5,000,000 in total; and
(ii) Accredited Lenders Professional Clients more than USD
50,000,000 in total; and/or
19
(b) the total aggregate consideration for the Permitted Investments offered by
an Issuer to:
(i) Retail Investors Clients using its service is USD 5,000,000 or less;
and
(ii) Accredited Investors Professional Clients using its service is USD
50,000,000 or less;
or an equivalent amount in another currency, calculated over a period of 12
months.
20
AIFC CONDUCT OF BUSINESS RULES
(…)
1. APPLICATION
(…)
1.2. Modifications and exclusions
(…)
1.2.2. Exclusions in relation to certain categories of Centre Participant
For the avoidance of doubt, the requirements in COB do not apply to:
(a) a Representative Office;
(b) unless otherwise provided under Rules made by the AFSA, an Authorised
Market Institution (other than an Authorised Crowdfunding Platform), except for
COB 3 (Communications with Clients and Financial Promotions);
(c) an Authorised Crowdfunding Platform, except for COB 3 (Communications with
Clients and Financial Promotions), COB 4 (Key Information and Client
Agreement), COB 7 (Conflicts of Interest), COB 8 (Client Assets) and COB
Schedule 2 (Key Information and Content of Client Agreement); or
(d) [intentionally omitted]
(e) unless otherwise provided under Rules made by the AFSA, a MTF Operator and
an OTF Operator, except for COB 15 (Complaints Handling and Dispute
Resolution);
(f) a Credit Rating Agency, except for COB 14 (Credit Rating Agencies).
For the purposes of 1.2.2(c), references in COB 3, COB 4, COB 7, COB 8 and COB
Schedule 2 to:
(a) "Authorised Firms" shall be read as if it were a reference to "an Authorised
Crowdfunding Platforms";
(b) "Regulated Activities" shall be read as if it were a reference to "Market
Activities";
(c) references to "Professional Client" or a "Market Counterparty" shall be read as
if they were a reference to "Accredited Lender or Accredited Investor"; and
[intentionally omitted]
(d) references to "Retail Client" shall be read as if they were a reference to "Retail
Lender or Retail Investor". [intentionally omitted]
(…)
21
AIFC GENERAL RULES
(…)
1. LICENSING OF CENTRE PARTICIPANTS
(…)
1.2. Authorised Market Institutions
Guidance: Definition of Market Activity
Market Activity is defined in the section 18 of the Framework Regulations as:
(a) Operating an Exchange;
(b) Operating a Clearing House;
(c) [intentionally omitted]
(d) Operating a Loan Crowdfunding Platform;
(e) Operating an Investment Crowdfunding Platform;
(f) Operating a Private Financing Platform. [intentionally omitted]
(…)
SCHEDULE 4: MARKET ACTIVITIES
(…)
6. Operating a Private Financing Platform [intentionally omitted]
(1) Operating a Private Financing Platform means operating an electronic platform which brings
together multiple third parties directly or indirectly buying an instrument acknowledging or creating
indebtedness arising from the supply of goods or the delivery of services.
(2) Operating an Operating a Private Financing Platform also includes:
(a) entering into an arrangement with a party for the purpose facilitating the activity described
in (1) whether through an intermediary investment vehicle or otherwise;
(b) facilitating an arrangement described in (2)(a); and/or
(c) holding or controlling Client Money or Arranging Custody in connection with an
arrangement described in (1), (2)(a), or (2)(b) above