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Writer's picture Eugénie Levy

DFSA Thematic Review: Crowdfunding Platform Operators

On 22nd October 2024, the Dubai Financial Services Authority (DFSA) published the findings of its thematic review of Crowdfunding Platform Operators’ (Operators) compliance with the Client Agreement and disclosure requirements in the DFSA’s Conduct of Business (COB) Rulebook. As a majority of investors on such platforms are Retail Clients, the DFSA considers it critical that Operators provide them with adequate levels of disclosure such that they have an adequate understanding of the risks associated with their investments.

We summarise below the DFSA’s key findings and recommendations.


Client Agreements


  • Exclusion or Limitation of Liability: Pursuant to COB 3.2.2, Operators are precluded from attempting to exclude or limit any duty or liability they may have to a person (including a Client) under DFSA-administered legislation. Notwithstanding this, some Operators seek to limit or disclaim their liability for information on issuers, investments or properties available on their platform. In its findings, the DFSA reminds Operators of their obligation: (a) to conduct due diligence on borrowers, issuers or sellers before allowing them to use their services (COB 11.3.6); (b) to act with due skill, care and diligence (GEN 4.2.2); and (c) to take responsibility for information provided on their platform.


  • Property Crowdfunding – Missing Client Agreement: Property sellers are “Clients” of an Operator of a Property Investment Crowdfunding Platform. Therefore, an Operator must enter into a Client Agreement containing the key terms prescribed by COB App2 before listing a seller’s property on its platform. The DFSA flags that Operators cannot rely on a Dubai Land Department Unified Contract or include the terms prescribed under App2 of COB in an annex to such Unified Contract.


  • Ensuring Clients Read the Client Agreement: Operators should ensure that Clients cannot access their services prior to having read, understood and agreed to the terms of their Client Agreement. Merely providing Clients with a link to a Client Agreement as part of the onboarding process is insufficient.


  • Amending the Client Agreement: Where a Client Agreement between an Operator and a Retail Client can be amended without the Client’s prior written consent, the Operator should give at least 14 days’ notice to the Client before amendments take effect unless it is impracticable to do so (COB 3.3.3). The DFSA indicated that Client Agreements should explicitly address this requirement. Further, Operators should adhere to this notice period when amending their Client Agreement.


  • Key Information in Client Agreements: Operators should review their Client Agreements to ensure they include all the terms mandated by COB App2. In particular, the DFSA noted deficiencies in the following key areas which Operators should address: (a) information on fees, costs and charges; (b) conflicts of interest disclosures; and (c) notifying Clients that a copy of their complaints handling procedures is available free of charge upon request.

Disclosure Requirements


  • Information About the Service: Operators should ensure that all key information about the operation of their services is prominently disclosed on their website, in accordance with COB 11.3.3. The DFSA noted that it would not regard information embedded in an Operator’s terms and conditions as being “prominently” disclosed.


  • Loan Crowdfunding – Disclosures: The DFSA identified that certain Operators of loan crowdfunding platforms failed to prominently disclose on their platform/website: (a) minimum information about borrowers in accordance with COB 11.3.7; (b) whether the information on which financial ratios are based has been audited (COB 11.3.7A(3)(c)); (c) whether the financial ratios have been verified by the Operators themselves or by a suitably qualified third party (COB 11.3.7A(4)(b)); and (d) a clear and fair summary of the assumptions used in determining expected default or failure rates for future loans entered into on the platform (COB 13.2.2(2)).


  • Misleading terminology: Operators should review the terminology used in their disclosures to ensure that it is clear, accurate and not misleading as well as consistent with DFSA terminology.


Next Steps


Operators should take the following actions in light of the DFSA’s findings:


  • Revisit Client Agreement-related Processes: Operators should review their processes to ensure they enter into a Client Agreement with their Clients before providing them with services, and that Clients have read and understood the terms of the Client Agreement before agreeing to be bound by its terms.   


  • Review and Amend Client Agreements: Operators must ensure their Client Agreements contain the key terms prescribed by COB App2. Clauses which are contrary to their regulatory obligations should be deleted or amended.


  • Enhance Disclosures: Operators should ensure that all prescribed disclosures are prominently displayed on their platform/website to allow investors to make informed investment decisions.


  • Strengthen Compliance Processes: Operators should review and enhance (where appropriate) their compliance framework to ensure compliance with all applicable regulatory requirements. Any compliance breach should be promptly identified, reported to the DFSA and acted upon.


A copy of the DFSA's report can be accessed here.

For more insights and personalised advice, feel free to reach out to Eugénie Levy.

This material is provided for general information only. It should not be relied upon for the provision of or as a substitute for legal or other professional advice.

DFSA's thematic review of Crowdfunding Platform Operators.

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