Updated 07/09/2024
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Article 6 - Individual portfolio management of loans

Article 6

1.   Where a crowdfunding service provider offers individual portfolio management of loans, an investor shall give the mandate specifying the parameters for providing the service, which shall include at least two of the following criteria that every loan in the portfolio will have to comply with:

(a)

the minimum and maximum interest rate payable under any loan facilitated for the investor;

(b)

the minimum and maximum maturity date of any loan facilitated for the investor;

(c)

the range and distribution of any risk categories applicable to the loans; and

(d)

if an annual target rate of return on investment is offered, the likelihood that the selected loans will enable the investor to achieve the target rate with reasonable certainty.

2.   In order to comply with paragraph 1, a crowdfunding service provider shall have in place robust internal processes and methodologies and use appropriate data. The crowdfunding service provider may use its own data or data sourced from third parties.

On the basis of sound and well-defined criteria, and taking into account all the relevant factors that may have unfavourable effects on the performance of the loans, the crowdfunding service provider shall assess:

(a)

the credit risk of individual crowdfunding projects selected for the investor’s portfolio;

(b)

the credit risk at the investor’s portfolio level; and

(c)

the credit risk of the project owners selected for the investor’s portfolio by verifying the prospect of the project owners meeting their obligations under the loan.

The crowdfunding service provider shall also provide a description of the method used for the assessments referred to in points (a), (b) and (c) of the second subparagraph to the investor.

3.   Where a crowdfunding service provider offers individual portfolio management of loans, it shall keep records of the mandate given and of every loan in an individual portfolio. The crowdfunding service provider shall keep records of the mandate and of every loan for at least three years after its maturity date on a durable medium.

4.   A crowdfunding service provider shall, on a continuous basis and upon the request of an investor, provide via electronic means at least the following information on each individual portfolio:

(a)

the list of individual loans of which a portfolio is composed;

(b)

the weighted average annual interest rate on loans in a portfolio;

(c)

the distribution of loans according to risk category, in percentage and absolute numbers;

(d)

for every loan of which a portfolio is composed, key information, including at least an interest rate or other compensation to the investor, maturity date, risk category, schedule for the repayment of the principal and payment of interest, compliance of the project owner with that instalment payment schedule;

(e)

for every loan of which a portfolio is composed, risk mitigation measures including collateral providers or guarantors or other types of guarantees;

(f)

any default on credit agreements by the project owner within the past five years;

(g)

any fees paid in respect of the loan by the investor, the crowdfunding service provider or the project owner;

(h)

if the crowdfunding service provider has carried out a valuation of the loan:

(i)

the most recent valuation;

(ii)

the valuation date;

(iii)

an explanation as to why the crowdfunding service provider conducted the valuation; and

(iv)

a fair description of the likely actual return, taking into account fees and default rates.

5.   Where a crowdfunding service provider has established and operates a contingency fund for its activity related to the individual portfolio management of loans, it shall provide the following information to the investors:

(a)

a risk warning specifying: ‘The contingency fund we offer does not give you a right to a payment so it may happen that you do not receive a pay-out even if you suffer loss. The contingency fund operator has absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the contingency fund when considering whether or how much to invest.’;

(b)

a description of the policy of the contingency fund, including:

(i)

an explanation of the source of the money paid into the fund;

(ii)

an explanation of how the fund is governed;

(iii)

an explanation concerning whom the money belongs to;

(iv)

the considerations the contingency fund operator takes into account when deciding whether or how to exercise its discretion to pay out from the fund, including:

whether or not the fund has sufficient money to pay; and

that the contingency fund operator has absolute discretion in any event not to pay or to decide the amount of the payment;

(v)

an explanation of the process for considering whether to make a discretionary payment from the fund; and

(vi)

a description of how the money paid into the fund will be treated in the event of insolvency of the contingency fund operator.

6.   A crowdfunding service provider that has established and operates a contingency fund as referred to in paragraph 5 shall provide the following information about the performance of the fund to the public on a quarterly basis:

(a)

the size of the contingency fund compared to the total amounts outstanding on loans relevant to the contingency fund; and

(b)

the ratio between payments made out of the contingency fund to the total amounts outstanding on loans relevant to the contingency fund.

7.   EBA shall, in close cooperation with ESMA, develop draft regulatory technical standards to specify:

(a)

the elements, including the format, that are to be included in the description of the method referred to in the third subparagraph of paragraph 2;

(b)

the information referred to in paragraph 4; and

(c)

the policies, procedures and organisational arrangements that crowdfunding service providers are to have in place as regards any contingency funds they might offer as referred to in paragraphs 5 and 6.

EBA shall submit those draft regulatory technical standards to the Commission by 10 November 2021.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.