Often, in the past, bona fide and poorly informed investors have fallen for high-risk or even deceptive offers. In order to create more transparency here, the so-called “gray capital market” should be regulated more sharply by a new retail investor law. Case showed that there was a need for regulation on the gray capital market and summed it up as follows:
“Where consumers find it difficult to protect themselves, we need to increase transparency.”
The Good Lender provides for an expansion of the prospectus obligation on all assets. The Federal Financial Supervisory Authority (BaFin) should control more and earlier point to questionable financial products. Suppliers and intermediaries of investments will in future be required to publish comprehensive and transparent information in their sales prospectuses. Violations of the duty to inform under the new retail investor law threaten drastic penalties up to the operating ban.
However, the new retail investor law provides for some exceptions. For example, social and charitable projects seeking financial resources in the gray financial market are exemplary from prospectus requirements. Above all, however, there are exceptions for collecting smaller amounts via crowdfunding platforms, in particular for financing startups.
In addition, extended advertising guidelines were adopted. Thus, there will be future advertising restrictions for products of the “gray market” such as profit participation certificates or direct loans. As a result, public advertising on billboards, such as buses and trains, will no longer be allowed in the future. If such advertising is placed in the media, it will in future be provided with a clear warning against the risk of loss due to the new retail investor law.
While the law on the new retail investor law is being endorsed by many consumer advocates and expressing their satisfaction with gray capital market regulation, startups are likely to face greater problems in financing their projects in the future.
Above all, the bureaucratic hurdles for major investments are criticized, which should certainly deter some potential financiers.
“The Federal Government is counteracting the law’s goal of better supporting startups in the future. The Good Lender creates a multitude of bureaucratic hurdles for crowd investing and makes it difficult for startups to attract new investors. At the same time, it gives investors the opportunity to invest. in startups. “
Unlike printed brochures, crowdfunding platform offerings provide a high degree of transparency. Through user comments, discussions and direct communication with the founders, investors are far better protected from fraudsters.
Problems and dangers see startups also with respect to application and marketing of projects and plants. The success in collecting money for own projects is based above all on viral communication measures whose origin and content are difficult to control. Here issues of admissibility of advertising measures provide for uncertainty. It is unclear who can be held responsible for investment promises: the issuer, the fan who spreads the message or the crowdfunding platform?