Published and draft legislation - Chile

Guidelines for regulating crowdfunding and related services

Financial Market Commission

On 11 February 2019, Chile’s Financial Market Commission  (CMF in the Spanish acronym) published a White Paper with general guidelines for regulating crowdfunding and related services to help the financial market to operate and develop more smoothly, given that it will have to deal with the challenges and demands arising as a result of these new activities.

The Commission’s expectation is for this report to form the basis to which all interested parties will provide their feedback and suggestions, so that progress can be made towards an appropriate regulatory framework that encourages innovation and greater inclusion in the provision of financial services, while also protecting investors and other users of these services, and safeguarding the integrity and stability of the financial system as a whole, without creating unnecessary obstacles to the sector’s development.

The White Paper  contains a summary of Crowdfunding and Fintech regulation in other jurisdictions (Argentina, Australia, Brazil, Colombia, European Union – Spain, the United States and Mexico), and of the principles and recommendations made by international bodies on the subject (International Organization of Securities Commissions - IOSCO, International Association of Insurance Supervisors - IAIS, Bank for International Settlements -BIS, Financial Action Task Force -FATF).

Fundamental principles

The regulation of the crowdfunding industry is built on the following principles:

  1. Proportionality: establishing requirements that are differentiated and proportionate to the inherent risks of the specific activities carried out by each institution.
  2. Neutrality: the regulation should not create regulatory asymmetries between institutions that use technology intensively and those that do not, nor should the regulation be designed around the use of one technology in particular.
  3. Integration: crowdfunding regulation should not only cover issues intrinsic to the activity, but also related services and issues, to enable companies to generate economies of scale and reach, while improving their local and regional competitiveness.
  4. Flexibility: it should enable different business models to co-exist, and these should be able to change over time without the need to constantly adapt the regulations.
  5. Modularity: recognizing that the service can be broken down into its component parts, and that there may therefore be service providers that only produce one component in the service value chain, which is why the demands that the institution must meet are directly related to the different components that it is going to produce.

Services covered by the regulation

The financial services involved or that might be involved in crowdfunding, and that should be regulated, are listed:

  • Crowdfunding platforms
  • Financial advisors
  • Purchase or payment order channels
  • Alternative transaction systems
  • Financial instrument custody