DFSA Thematic Review - Crowdfunding Operators

The Riffle

Crowdfunding Operators have to take a detailed look at their Client Agreements and platform disclosures so as to ensure completeness of information as required under the DFSA Rules.

The DFSA recently released a Thematic Review on Client Agreements and Disclosure Requirements for Crowdfunding Platform Operators.

Key takeaways:

Client Agreements

• Operators must take responsibility for the information they provide about loans, investments or property (as applicable) offered on their platform, conduct proper due diligence as required by COB 11.3.6, and ensure their business activities are conducted with due skill, care and diligence as required by GEN 4.2.2. They must not seek to avoid or limit these responsibilities in any form of communication, including Client Agreements.

• Operators must ensure they have a proper Client Agreement in place with a seller before listing that seller’s property on their platform and ensure that the agreement includes all key information specified in COB App 2 and complies with DFSA Rules.

• Operators should ensure they have a proper Client Agreement in place. They should also revise their approach and processes for Client Agreements to ensure that all Clients have read the T&Cs and other relevant documents before being permitted to make an investment commitment on their platform.

• Operators must revise their Client Agreements and related processes to ensure compliance with COB Rule 3.3.3.

• Operators must revise their Client Agreements with Retail Clients to include all core information required by COB A2.1.2 (1).

Disclosure Requirements

• Operators must ensure that information required by COB 11.3.3 is disclosed in a prominent manner on its website to allow Clients to understand all aspects of the Operator’s platform prior to its usage.

• Loan CF Operators must ensure that the required information as per COB 11.3.7  is disclosed in a prominent manner on its platform and clearly accessible to enable investors to understand all aspects of the investment they are making and make an informed decision.

• Loan Crowdfunding Operators must ensure that the summary of the assumptions used in determining the expected default rates is accurate and comprehensive and presented in a manner that is fair, clear and not misleading as mandated by COB 11.3.2(2)(b) and (c).

• Operators must ensure that all communications, including those shared via their website and platform, are consistent with DFSA terminology and are clear, fair and not misleading, as required by COB 3.2.1. Examples include usage of terms such as “custodian account” or “escrow account” to describe a Client Money Account, or “secondary market” to describe a facility for the transfer of loans or investments, and unusual terms such as “best in breed” to describe characteristics of a platform.

• Operators must establish and maintain compliance arrangements, including processes and procedures that ensure and evidence compliance with applicable legislation DFSA Rulebook under GEN 5.3.7. This includes ensuring the adequacy of required disclosures and monitoring and reporting any compliance breaches and ensure they are promptly acted upon per GEN 5.3.11. In short, an adequate Compliance Monitoring Program.

You can read the complete Thematic Review here.