The Saeima1 has adopted and
the President has proclaimed the following law:
Crowdfunding
Services Law
Chapter I
General Provisions
Section 1. Terms Used in the Law
The terms used in the Law correspond to the terms used in
Regulation (EU) 2020/1503 of the European Parliament and of the
Council of 7 October 2020 on European crowdfunding service
providers for business, and amending Regulation (EU) 2017/1129
and Directive (EU) 2019/1937 (hereinafter - Regulation No
2020/1503).
Section 2. Purpose of the Law
The purpose of the Law is to promote the development of the
field of crowdfunding services, to strengthen the stability and
reliability of the crowdfunding service market, to protect the
interests of the clients of crowdfunding service providers, and
also to determine the requirements in the field of crowdfunding
services.
Section 3. Scope of Application of
this Law
This Law prescribes:
1) the procedures for the issuing and registration of
authorisations for the operation of crowdfunding service
providers, their operation and liability in accordance with
Regulation No 2020/1503;
2) the rights, obligations, and also powers of the competent
authority to issue regulatory provisions binding on crowdfunding
service providers.
Section 4. Competent Authority
(1) In Latvia, the Financial and Capital Market Commission
(hereinafter - the Commission) shall be the competent authority
designated in accordance with Article 29(1) of Regulation No
2020/1503.
(2) The Commission is entitled to issue regulatory
provisions:
1) on the management of information technology and security
risks of crowdfunding service providers;
2) on the content of and procedures for the submission of
reports on activities and other information to be provided by
crowdfunding service providers.
(3) The Commission has the right to determine the requirements
governing the activities of crowdfunding service providers
arising from the decisions, guidelines, and recommendations
adopted by the European Banking Authority or the European
Securities and Markets Authority in the field of crowdfunding
services.
(4) An administrative act of the Commission issued in
accordance with the requirements of this Law, Regulation No
2020/1503, and other directly applicable legal acts of the
European Union in the field of crowdfunding services or an actual
action of the Commission taken in accordance with the
requirements of this Law, Regulation No 2020/1503, and other
directly applicable legal acts of the European Union in the field
of crowdfunding services may be appealed before the Regional
Administrative Court. The court in the composition of three
judges shall examine the case as the court of first instance. A
judgement of the Regional Administrative Court may be appealed by
submitting a cassation complaint.
Chapter
II
Authorisation or Refusal of Authorisation of a Crowdfunding
Service Provider
Section 5. Commencement of the
Operation of a Crowdfunding Service Provider
(1) In order to receive an authorisation for the operation of
a crowdfunding service provider and to register with the register
of crowdfunding service providers, a crowdfunding service
provider shall submit an application to the Commission, appending
thereto the documents and information referred to in Regulation
No 2020/1503 and other directly applicable legal acts of the
European Union.
(2) A crowdfunding service provider does not have the right to
engage in any other commercial activity in addition to the
provision of crowdfunding services if it undermines or is likely
to undermine the financial stability of the crowdfunding service
provider or the ability of the Commission to supervise the
conformity of the operation of the crowdfunding service provider
with the requirements of Regulation No 2020/1503. The Commission
may request that a separate legal person is established for the
provision of crowdfunding services.
Section 6. Procedures for Issuing
and Refusing an Authorisation for the Operation of a Crowdfunding
Service Provider
(1) The Commission shall, by a decision, grant or refuse to
grant an authorisation for the operation of a crowdfunding
service provider in accordance with the procedures and within the
time period laid down in Regulation No 2020/1503.
(2) When examining the documents and information submitted for
the receipt of an authorisation for the operation of a
crowdfunding service provider, the Commission has the right to
request the crowdfunding service provider to make amendments
thereto or to submit additional documents and information
necessary to enable the Commission to verify that the
crowdfunding service provider is acting in a prudent and cautious
manner, and also that the requirements laid down in this Law,
Regulation No 2020/1503, and other directly applicable legal acts
of the European Union in the field of crowdfunding services are
fulfilled.
(3) If the Commission takes the decision referred to in
Paragraph one of this Section, appeal against such decision shall
not suspend its operation.
Chapter
III
Activities of the Crowdfunding Service Provider and Provision of
Information to Clients
Section 7. General Requirements
(1) The relationship between a crowdfunding service provider
and its clients shall be determined by this Law, Regulation No
2020/1503, other directly applicable legal acts of the European
Union in the field of crowdfunding services, and civil law
contracts concluded by the crowdfunding service provider with the
clients.
(2) A crowdfunding service provider has an obligation to
provide services in a professional and responsible manner, taking
into account the interests of clients.
(3) A crowdfunding service provider shall conform its
activities with the requirements of this Law, Regulation No
2020/1503, other directly applicable legal acts of the European
Union in the field of crowdfunding services and the requirements
of the regulatory provisions issued by the Commission governing
the activities of crowdfunding service providers.
(4) The funding raised through crowdfunding services may in no
way be used for the provision of other financial services.
(5) If a collateral is provided for the fulfilment of the
liabilities of the project owner, it is registered in the name of
the crowdfunding service provider or a special purpose vehicle
established by it, with a notation that the relevant mortgage or
commercial pledge secures the claim of the investor. The
collateral serving for the fulfilment of the liabilities of the
project owner shall not be included in the assets of the
crowdfunding service provider or special purpose vehicle out of
which the claims of the creditors of the crowdfunding service
provider shall be met.
Section 8. Provision of Information
to Clients and Persons Responsible for It
(1) A crowdfunding service provider shall make a key
investment information sheet in at least the official language
available to the prospective investors in Latvia, and this sheet
shall be prepared by the project owner for each crowdfunding
offer.
(2) The project owner and its supervisory authority or
executive authority shall be responsible for ensuring that the
information provided in the key investment information sheet is
accurate and presented in accordance with the requirements laid
down in Regulation No 2020/1503 and other directly applicable
legal acts of the European Union in the field of crowdfunding
services.
(3) The project owner shall indicate in the key investment
information sheet the persons responsible for the information
provided in the sheet, indicating the given name, surname, and
position for natural persons and the firm name and legal address
for legal persons.
(4) A crowdfunding service provider providing individual
portfolio management of loans services shall prepare and make
available a key investment information sheet at platform level at
least in the official language to prospective investors in
Latvia.
(5) A crowdfunding service provider and its supervisory
authority or executive authority shall be responsible for
ensuring that the information provided in the key investment
information sheet at platform level is accurate and presented in
accordance with the requirements laid down in Regulation No
2020/1503 and other directly applicable legal acts of the
European Union in the field of crowdfunding services.
(6) The key investment information sheet at platform level
shall indicate the persons responsible for the information
provided in the sheet, indicating the given name, surname, and
position for natural persons and the firm name and legal address
for legal persons.
(7) The Commission is entitled to require the project owner
and the persons responsible for completing the key investment
information sheet to provide information and documents necessary
for the Commission to verify the conformity of activities of the
project owner with the requirements laid down in this Law,
Regulation No 2020/1503, and other directly applicable legal acts
of the European Union in the field of crowdfunding services.
(8) Crowdfunding service providers shall provide marketing
communications in Latvia at least in the official language.
Chapter
IV
Supervision of the Operation of a Crowdfunding Service Provider
and Withdrawal of an Authorisation
Section 9. General Supervision
Requirements
(1) The Commission shall, in accordance with the requirements
laid down in this Law, Regulation No 2020/1503, and other
directly applicable legal acts of the European Union in the field
of crowdfunding services, supervise the operation of crowdfunding
service providers which have received an authorisation issued by
the Commission.
(2) The Commission has the right to determine additional
requirements governing the operation of crowdfunding service
providers in order to mitigate the operational risks of
crowdfunding service providers and to protect the clients of
crowdfunding service providers.
(3) A crowdfunding service provider has an obligation to
immediately inform the Commission of any changes in the
information submitted to it in order to receive an authorisation
for the operation of a crowdfunding service provider, including
of any circumstances which may have a negative impact on its
future operation.
Section 10. Rights of the Commission
in Implementation of Supervision
(1) In order to verify the conformity of the operation of a
crowdfunding service provider with the requirements laid down in
this Law, Regulation No 2020/1503, and other directly applicable
legal acts of the European Union in the field of crowdfunding
services, the Commission has the right to:
1) request that the information and documents on the
fulfilment of the requirements in the field of crowdfunding
services is provided by the crowdfunding service provider, third
parties selected to perform the tasks in relation to the
provision of crowdfunding services, and also natural or legal
persons having control over the crowdfunding service provider or
the third parties or over whom control is exercised by the
crowdfunding service provider or such third parties;
2) request that the sworn auditor or the commercial company of
sworn auditors and the supervisory authority or executive
authority of the crowdfunding service provider and of third
parties selected to perform the tasks in relation to the
provision of crowdfunding services provide information on the
fulfilment of the requirements in the field of crowdfunding
services;
3) carry out inspections in places other than the private
place of residence of natural persons and enter their premises in
order to access documents and other data in any format if there
are reasonable grounds to suspect that the documents and other
data relating to the subject-matter of the inspection may be
relevant to prove infringements in the field of crowdfunding
services;
4) to verify the identity, criminal record, and information
relating to the founders, shareholders, or members and officers
of the crowdfunding service provider in order to ascertain the
adequacy of the free capital and the origin of the funds
invested;
5) request that the crowdfunding service provider submits
reports on activities;
6) transfer the contracts concluded by the crowdfunding
service provider to another crowdfunding service provider in
accordance with Article 30(2)(i) of Regulation No 2020/1503 if
the authorisation of the crowdfunding service provider is
withdrawn in accordance with Article 17(1), first sub-paragraph,
point (c) of Regulation No 2020/1503.
(2) If there are reasonable grounds to suspect that the
requirements laid down in this Law, Regulation No 2020/1503, and
other directly applicable legal acts of the European Union in the
field of crowdfunding services are being violated, the Commission
has the right to apply the following supervisory measures:
1) to suspend or request that the crowdfunding service
provider or the third party selected to perform the tasks related
to the provision of crowdfunding services suspends the provision
of crowdfunding services for a period of up to 10 working
days;
2) to suspend the publication of the crowdfunding offer for a
period of up to 10 working days;
3) to prohibit or suspend the publication of marketing
communications or to request that the crowdfunding service
provider or the third party selected to perform the tasks in
relation to the provision of crowdfunding services prohibits or
suspends the publication of marketing communications for a period
of up to 10 working days.
(3) The Commission is entitled to take decisions in order to
perform the tasks assigned to it by this Law, Regulation No
2020/1503, and other directly applicable legal acts of the
European Union in the field of crowdfunding services.
(4) If the Commission has issued an administrative act on the
basis of the provisions of Paragraphs one, two, and three of this
Section, appeal against such act shall not suspend its
operation.
Section 11. Withdrawal of the
Authorisation for the Operation of a Crowdfunding Service
Provider
(1) The Commission has the right to withdraw an authorisation
for the operation of a crowdfunding service provider by a
decision in the cases referred to in Regulation No 2020/1503.
(2) If the Commission, on the basis of the provisions of
Paragraph one of this Section, has issued an administrative act,
appeal against such act shall not suspend its operation.
Chapter V
Liability for Violations in the Field of Crowdfunding
Services
Section 12. Application of
Administrative Measures and Sanctions
The Commission is entitled to impose the sanctions and
administrative measures referred to in Section 13 of this Law if
it establishes that the crowdfunding service provider or the
person responsible for the violation has failed to comply
with:
1) the requirements laid down in Article 3 of Regulation No
2020/1503 with regard to the provision of crowdfunding
services;
2) the requirements laid down in Article 4 of Regulation No
2020/1503 with regard to effective and prudent management of the
activities of the crowdfunding service provider and the
determination of the price of the crowdfunding offer;
3) the requirements laid down in Article 5 of Regulation No
2020/1503 with regard to the due diligence of the project
owner;
4) the requirements laid down in Article 6(1), (2), (3), (4),
(5), and (6) of Regulation No 2020/1503 with regard to the
individual portfolio management of loans and the information to
be disclosed to clients;
5) the requirements laid down in Article 7(1), (2), (3), and
(4) of No Regulation 2020/1503 with regard to the handling of
complaints from clients;
6) the requirements laid down in Article 8(1), (2), (3), (4),
(5), and (6) of Regulation No 2020/1503 with regard to the
handling of conflicts of interest and the information to be
disclosed to clients;
7) the requirements laid down in Article 9(1) and (2) of
Regulation No 2020/1503 with regard to the organisation of
outsourcing and the management of operational risks;
8) the procedures for the provision of asset safekeeping
services and payment services laid down in Article 10 of
Regulation No 2020/1503;
9) the requirements laid down in Article 11 of Regulation No
2020/1503 with regard to compliance with prudential safeguards,
including their characteristics and calculation procedures;
10) the requirements laid down in Article 12(1) of Regulation
No 2020/1503 with regard to the application for authorisation of
a crowdfunding service provider if a person intends to provide
crowdfunding services;
11) the requirements laid down in Article 13(2) of Regulation
No 2020/1503 with regard to the application for authorisation of
a crowdfunding service provider in the event of extension of
activities;
12) the requirements laid down in Article 15(2) and (3) of
Regulation No 2020/1503 with regard to notifying the Commission
of any material changes to the conditions for authorisation, and
also in the event of failure to provide the information
requested;
13) the requirements laid down in Article 16(1) of Regulation
No 2020/1503 with regard to the provision of information to the
Commission in relation to reporting by the crowdfunding service
provider;
14) the requirements laid down in Article 18(1) and (4) of
Regulation No 2020/1503 with regard to the commencement of
cross-border provision of crowdfunding services and the provision
of services in other Member States;
15) the requirements laid down in Article 19(1), (2), (3),
(4), (5), and (6) of Regulation No 2020/1503 with regard to the
information to be provided to clients of crowdfunding service
providers or the procedures for providing it;
16) the requirements laid down in Article 20(1) and (2) of
Regulation No 2020/1503 with regard to the disclosure of default
rates on the website of a crowdfunding service provider or the
procedures for the publication thereof;
17) the requirements laid down in Article 21(1), (2), (3),
(4), (5), (6), and (7) of Regulation No 2020/1503 with regard to
investor knowledge test and simulation of the ability to bear
loss or the procedures for the application thereof;
18) the requirements laid down in Article 22 of Regulation No
2020/1503 with regard to the provision of, or compliance with, a
pre-contractual reflection period;
19) the requirements laid down in Article 23(2), (3), (4),
(5), (6), (7), (8), (9), (10), (11), (12), and (13) of Regulation
No 2020/1503 with regard to the information to be included in the
key investment information sheet or the procedures for providing
it;
20) the requirements laid down in Article 24 of Regulation No
2020/1503 with regard to the information to be included in the
key investment information sheet at platform level or the
procedures for providing it;
21) the requirements laid down in Article 25 of Regulation No
2020/1503 with regard to the use of a bulletin board or the
information to be included therein;
22) the requirements laid down in Article 26 of Regulation No
2020/1503 with regard to keeping of records of all data relating
to the services and transactions of the crowdfunding service
provider and the access of clients to such records;
23) the requirements laid down in Article 27(1), (2), and (3)
of Regulation No 2020/1503 with regard to the information to be
included in marketing communications or the procedures for the
publication thereof.
Section 13. Sanctions and
Administrative Measures
(1) When taking a decision on the violations referred to in
Section 12 of this Law, the Commission is entitled to impose the
following sanctions:
1) a warning to the crowdfunding service provider or the
natural person responsible for the violation;
2) an obligation for the crowdfunding service provider to
remove from office a member of its executive board or supervisory
board or a prohibition for the natural person responsible for the
violation to perform the duties assigned to him or her in the
crowdfunding service provider if that person has violated the
requirements laid down in Regulation No 2020/1503;
3) a fine for the legal person or the natural person
responsible for the violation of up to twice the amount of the
benefit derived from the violation if such benefit can be
established, even if it exceeds the amounts specified in Clause 4
or 5 of this Paragraph of the Section;
4) a fine for the legal person of up to EUR 500 000 or up to
five per cent of the total annual turnover of the abovementioned
legal person according to the latest available financial
statement. If the legal person is a parent undertaking or a
subsidiary of a parent undertaking which prepares a consolidated
financial statement in accordance with the Law on Annual
Statements and Consolidated Annual Statements, the relevant total
annual turnover shall be the total annual turnover or the
corresponding type of income in accordance with the relevant
legal acts of the European Union in the field of accounting,
taking into consideration the latest available consolidated
financial statement of the ultimate parent undertaking;
5) a fine for the natural person of up to EUR 500 000;
6) the cancellation of the registration of the crowdfunding
service provider in the register of crowdfunding service
providers in accordance with Article 17(1), first subparagraph,
point (f) or Article 17(1), second subparagraph, point (a) of
Regulation No 2020/1503.
(2) When taking a decision on the violations referred to in
Section 12 of this Law, the Commission is entitled to impose the
following administrative measures until the violation has been
remedied:
1) a public statement indicating the crowdfunding service
provider or the third party selected to perform the tasks related
to the provision of crowdfunding services and the nature of the
violation;
2) a prohibition on the provision of crowdfunding
services;
3) a prohibition on the publication of the crowdfunding
offer;
4) a request that the crowdfunding service provider or the
person responsible for the violation to immediately ceases the
respective acts.
(3) A person who is responsible for the information provided
in the key investment information sheet at platform level,
including any translation thereof, shall be liable under
Paragraph one or two of this Section in either of the following
cases:
1) the information is misleading or inaccurate;
2) the key investment information sheet at platform level does
not contain information necessary to enable investors to consider
whether to invest through the individual portfolio management of
loans.
(4) A person who is responsible for the information provided
in the key investment information sheet, including any
translation thereof, shall be liable under Paragraph one or two
of this Section in either of the following cases:
1) the information is misleading or inaccurate;
2) the key investment information sheet does not contain
information necessary to enable investors to consider whether to
finance the crowdfunding project.
(5) If the Commission, on the basis of the provisions of
Paragraphs one, two, three, and four of this Section, has issued
an administrative act, except for the decision to impose a fine,
appeal against such act shall not suspend its operation.
(6) The Commission shall publish on its website information on
the sanctions and administrative measures imposed on a person in
accordance with Paragraphs one, two, three, and four of this
Section in accordance with the requirements and procedures laid
down in Regulation No 2020/1503.
Section 14. Statute of
Limitation
(1) If a crowdfunding service provider or the person
responsible for the violation violates the requirements laid down
in this Law, Regulation No 2020/1503, and other directly
applicable legal acts of the European Union in the field of
crowdfunding services, the Commission is entitled to initiate
proceedings within a maximum period of five years from the day on
which the violation was committed or, if the violation is
continuous, from the day on which the violation ceased.
(2) The calculation of the statute of limitation specified in
Paragraph one of this Section shall be stopped from the day of
initiation of the proceedings.
(3) The Commission may take the decision on the imposition of
the sanctions and administrative measures specified in Section 13
of this Law within two years from the day of initiation of the
proceedings.
(4) Due to objective reasons, including if the proceedings
require a protracted determination of facts, the Commission may,
by taking a relevant decision, extend the time period for taking
of the decision specified in Paragraph three of this Section for
a time period not exceeding three years from the day of
initiation of the proceedings. The decision on extending the time
period shall not be subject to appeal.
(5) The Commission shall terminate the proceedings if no
decision on the imposition of sanctions and administrative
measures specified in Section 13 of this Law has been taken
within the time period specified in Paragraph three of this
Section.
Chapter
VI
Payments by the Crowdfunding Service Provider to the
Commission
Section 15. Payments to the
Commission
(1) A person wishing to provide crowdfunding services shall
pay to the Commission EUR 2500 for the examination of documents
and information submitted for the receipt of the authorisation
for the operation of a crowdfunding service provider.
(2) After registration in the register of crowdfunding service
providers, a crowdfunding service provider shall pay to the
Commission EUR 4000 per year and in addition up to and including
1.4 per cent per year of the gross revenue related to the
provision of crowdfunding services, but the total amount of
payments by the crowdfunding service provider shall not exceed
EUR 100 000 per year.
Section 16. Procedures for
Calculating and Making Payments
(1) After registration with the register of crowdfunding
service providers, a crowdfunding service provider shall, in
accordance with the procedures and within the time periods
stipulated by the Commission, submit a report thereto which is
necessary for the calculation of the payments specified in
Section 15, Paragraph two of this Law and shall make the relevant
payment by the thirtieth day of the month following the
quarter.
(2) The Commission shall issue regulatory provisions on the
procedures for the calculation and payment of the payments
referred to in Section 15, Paragraph two of this Law and the
submission of the report referred to in Paragraph one of this
Section.
Chapter
VII
Examination of Submissions and Complaints
Section 17. Procedures for Examining
Submissions and Complaints within the Competence of the
Commission
(1) The Commission shall examine submissions and complaints
from such clients who are not considered to be consumers with
regard to violations of this Law, Regulation No 2020/1503, and
other directly applicable legal acts of the European Union in the
field of crowdfunding services. If it does not arise from the
information provided in the submission or complaint and the
accompanying materials that there has been a violation which has
caused or can cause significant harm to the interests of a group
of clients (collective interests), the Commission is entitled to
not initiate administrative proceedings. The Commission shall
provide a reply to the submitter of the submission or complaint
in accordance with the procedures laid down in the Law on
Submissions.
(2) If the Commission, when examining an administrative case,
establishes that the non-conformity with this Law, Regulation No
2020/1503, and other directly applicable legal acts of the
European Union in the field of crowdfunding services has caused
or can cause significant harm to the interests of a group of
clients (collective interests), it is entitled to take a decision
ordering the crowdfunding service provider or project owner to
terminate the non-conformity with this Law, Regulation No
2020/1503, and other directly applicable legal acts of the
European Union in the field of crowdfunding services or to remedy
the violations committed, and to determine a time period for the
implementation of the actions necessary for that purpose.
(3) The Commission is entitled, within its competence, to
request information from the crowdfunding service provider and
the client of the crowdfunding service provider necessary for the
examination of the administrative case or complaint, which shall
be used only for examination of the administrative case or
complaint, and also to determine a time period for the submission
of the information.
Section 18. Procedures for Examining
Submissions and Complaints within the Competence of the Consumer
Rights Protection Centre
(1) The Consumer Rights Protection Centre shall, in accordance
with the laws and regulations governing the protection of
consumer rights, examine submissions and complaints from
investors who are considered to be consumers with regard to
non-conformity with the consumer protection requirements laid
down in this Law, Regulation No 2020/1503, including the
provisions of the abovementioned Regulation on publication of
marketing communications, and other directly applicable legal
acts of the European Union in the field of crowdfunding services.
If it does not arise from the information provided in the
submission or complaint and the accompanying materials that there
has been a violation which has caused or can cause significant
harm to the interests of a group of consumers (collective
interests), the Consumer Rights Protection Centre is entitled not
to initiate an administrative case. In such a case, the Consumer
Rights Protection Centre shall provide a reply to the user of
crowdfunding services.
(2) If the Consumer Rights Protection Centre, when examining
an administrative case in accordance with Paragraph one of this
Section, establishes that the non-conformity with the
requirements of this Law, Regulation No 2020/1503, and other
directly applicable legal acts of the European Union in the field
of crowdfunding services has caused or can cause significant harm
to the interests of a group of consumers (collective interests)
or to an individual consumer, it is entitled to take a decision
ordering the crowdfunding service provider or project owner to
terminate the non-conformity with this Law and other directly
applicable legal acts of the European Union in the field of
crowdfunding services or to remedy the violations committed, and
to determine a time period for the implementation of the actions
necessary for that purpose. The procedures by which the Consumer
Rights Protection Centre shall take a decision and the procedures
for appealing such decision shall be determined in the Consumer
Rights Protection Law.
The Law has been adopted by the Saeima on 7 April
2022.
President E. Levits
Rīga, 20 April 2022
1The Parliament of the Republic of
Latvia
Translation © 2022 Valsts valodas centrs (State
Language Centre)
