Financial Services, Latvia

The Cabinet of Ministers committee on Monday reviewed the Crowdfunding Law, drafted by the Finance Ministry. However, after discussions between policy-makers and representatives of the financial industry, the adoption of the draft legislation was postponed.

The draft regulation is intended to promote the development of crowdfunding services on the Latvian financial and capital market by providing the rules for crowdfunding services, responsibility, licensing and supervision of the providers of these services, as well as the protection of investors and loan recipients.

The draft legislation, however, would not allow for assignment of claims on crowdfunding sites, which in the Finance Ministry’s opinion significantly reduces the services providers’ risks.

After the meeting of the Cabinet of Ministers committee, Finance Minister Dana Reizniece-Ozola told journalists that work on the bill had been going on for a couple of years already but that disagreements still remained with some of the financial industry’s players who insisted on including assignment of claims in the services allowed on crowdfunding platforms. The finance minister said a political decision was needed to resolve the issue.

“Assignment of claims is not practiced widely in Europe. Furthermore, crowdfunding platforms do not assume responsibility in such cases, leaving the investors less protected as they do not have sufficient information for making the financial investment. The Financial and Capital Market Commission (FCMC) also underlines that the new business forms have to respect the interests of the investors and recipients of the investment. At present, those investors that invest their money in the already operating investment platforms may not always receive sufficient information, so they are less protected,” the finance minister said.