Crowdfunding: the AMF urges investors to exercise extreme caution due to the risks of project owner default or crowdfunding platform failure

As part of its mission to support and protect retail investors, the Autorité des Marchés Financiers strongly encourages vigilance regarding the risks associated with this type of investment. In particular, the AMF wishes to highlight several risks associated with crowdfunding investment:

Risk of capital loss and liquidity risk

Crowdfunding investment often resembles venture capital, involving investments in unlisted companies at early or growth stages.

Investors must be prepared to:

• lose all or part of the capital invested or the sums lent;
• hold securities, which may be difficult to resell.

Risk of late payment/repayment or default by the project owner

While some projects may be attractive and offer higher expected returns than lower-risk investments, interest payments and capital repayment are never guaranteed. In the event of financial difficulties or default of the project owner, investors may face delays - or even a total loss - of payments or repayments.

Risk of incurring additional costs

In cases of default or difficulties in recovering funds, additional expenses may arise (e.g. legal proceedings, debt collection, or representation of bondholders). Given the relatively small size of many crowdfunding projects, these costs can represent a significant proportion of the investment.

Risk of platform failure

There is also a risk that the CSP platform may cease operations. In such cases, investors may lose access to the platform. CSPs are required to have a business continuity plan (BCP) to ensure that critical functions continue, such as processing payments and repayments, communicating with investors and, if necessary, transferring these functions to a third-party provider.

However, this plan may not cover activities outside the CSP’s obligations, such as initiating legal proceedings to recover debts. If the platform shuts down, investors may have to deal directly with the project owner and initiate any recovery procedures themselves - potentially at their own expense - unless a collective representative has already been appointed to act on their behalf.

The AMF therefore urges investors to  carefully assess these risks before subscribing and to read the following documents thoroughly:

• The key investment information sheet;
• The subscription form for each project;
• Legal notices and disclaimers on the crowdfunding platform's website.

The AMF also recommends reviewing additional information available on the platform:

• Procedures in case of platform failure;
• Whether a representative has been appointed for bondholders;
• The conditions applicable in the event of default or financial difficulties of the project owner, including whether the intervention of external service providers (lawyers, bailiffs, debt recovery agencies) is foreseen - and at whose expense.

Before subscribing, investors should ask themselves the following key questions:

• Who will manage the project if the platform ceases operations?
• Has a service provider been appointed in advance to represent investors in such a case?
• Who is responsible for recovering funds from defaulting project owners, under what conditions, and at what cost?
• Are the potential costs related to investor representation and debt recovery clearly disclosed - for all possible scenarios?