The Estonian Financial Supervision Authority is prevailing on the Government to pass a law regulating the activity of companies offering crowdfunding services.

In the FSA’s opinion, the crowdfunding area is suffering from 'legal uncertainty.' The idea is to protect the savings of people who have invested in crowdfunding companies.

Crowdfunding companies are not the subjects of financial supervision at the moment and the FSA, for the time being, is not proposing that they should be put under national financial supervision either. Crowdfunding companies do not need an authorisation from the FSA. This initiative is primarily targeted for protecting the clients of crowdfunding companies. Most of the FSA's proposals concern the disclosure and transparency of information, the protection of personal data, the management of conflicts of interests and the need to guarantee the separation of assets. In addition, the regulator believes that crowdfunding companies should lower the risks (such as money laundering) that threaten the financial sector.

This initiative by the FSA does not concern crowdfunding based on donations and prizes.

A senior regulator said: “Because crowdfunding has yet not been harmonised on the European Union level, several member-states have begun to regulate this area on their own as crowdfunding is developing rapidly. We believe that our initial draft law helps to frame the coming discussions on regulating crowdfunding where we can reach a balanced result in an open and inclusive way. We think that the crowdfunding market in the EU should be opened, because we see this as a good opportunity to open the potential of the single market for our entrepreneurs.”

The regulator does not want the Government to change the requirements stipulated in the special financial sector laws mentioned in the second paragraph of the Financial Supervision Authority Act - laws such as the Credit Institutions Act, the Securities Market Act, the Creditors and Credit Intermediaries Act, the Investment Funds Act etc. It wants to oblige crowdfunding companies to apply for authorisation, register its activity or make a public offering of securities. The crowdfunding company or the person planning to engage in such activities ought to assess itself/himself to see whether its/his activity qualifies as worthy of authorisation or registration.