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INVESTOR CLASSIFICATION POLICY

This is CrowdedHero’s Investor Classification Policy (“Policy”) applicable to the Services (as defined below). This Policy forms an integral part of CrowdedHero’s Terms and Conditions.

The Policy may be made available in several languages; all versions are legally binding, but in the event of inconsistency between the Latvian version and a translated version, the Latvian version prevails.

The version of this Policy is effective as of 27th of September, 2022.

1    DEFINITIONS

2    GENERAL INFORMATION

2.1      We, without taking on its own risk, operate and manage the Platform. At the date of the Policy, we have the crowdfunding service provider licence for the provision of the Services issued by the Financial Capital Market Committee of Latvia (for further information please see https://www.fktk.lv/en/market/crowdfunding-service-providers). The Services are provided in a professional, fair and transparent way, we apply the requirements of the ECSPR when rendering the Services and to our internal operations.

2.2      We recommend to download or print a copy of this Policy and store it for your records and future reference. If you want a copy of this Policy, please e-mail to [email protected] with the words ‘Investor Classification Policy’ in the subject line of your e-mail message.

3    PURPOSE AND SCOPE

3.1      This Policy explains how we classify and re-classify the Investors. CrowdedHero complies with requirements of applicable laws with respect to the Investors’ status and protection of interests of the Investors during provision of the Services.

3.2      The objective of this Policy is to ensure that the Investors’ classification is determined, and the Investors are informed of their protection level by us.

4    GENERAL PROVISIONS

4.1      When providing the Services, we are acting honestly, decently and professionally and provides honest, clear and correct communication, taking into account the specific situation of an Investor.

4.2      We ensure an appropriate protection level for every Investor according to its classification while providing the Services.

4.3      To ensure adequate protection of an Investor, it may be classified as:

4.3.1      the Non-Sophisticated Investor; or

4.3.2      the Sophisticated Investor.

4.4      The classification of the Investors is executed during the Investor registration process on the Platform. As part of the registration process, an Investor may choose the classification category that according to the Investor’s own opinion is the most suitable for it. If the Investor desires to be classified as the Sophisticated Investor, the Investor shall submit the Request that is made available to it during the registration process on the Platform to us.

4.5      An Investor who during the registration process requests to be categorized as:

4.5.1      the Non-Sophisticated Investor will be requested to take the Knowledge Test and use Simulation prior to the provision of the Services by us;

4.5.2      the Sophisticated Investor may be requested by us to provide a proof that it complies with the criteria of the Sophisticated Investor set forth on Section 7.2, 7.3 or 7.4 hereof.

4.6      The classification of all Investors is finalized by us prior to the provision of the Services. However, if we are not able to undertake a classification assessment due to reasons beyond our control, the default classification of the Non-Sophisticated Investor will be given to an Investor.

5    INFORMATION REQUIREMENTS

5.1      In relation to an Investor’s status, we will inform the Investor through the Platform prior to any provision of the Services that, on the basis of the information available to us, the Investor is classified as:

5.1.1      the Non-Sophisticated Investor, and will be treated as such unless we apply the Sophisticated Investor status to the Investor according to this Policy;

5.1.2      the Sophisticated Investor, and will be treated as such unless we apply the Non-Sophisticated Investor status to the Investor according to this Policy.

5.2      If an Investor requests to change its classification category, we will inform the Investor through the Platform:

5.2.1      prior to the change of the Investor’s status from the Non-Sophisticated Investor to the Sophisticated Investor, on the investor protection rights it is likely to lose while in the status of the Sophisticated Investor;

5.2.2      prior to the change of the Investor’s status from the Sophisticated Investor to the Non-Sophisticated Investor, on the investor protection rights, it gains with the changing the status to the Non-Sophisticated Investor.

6    NON-SOPHISTICATED INVESTOR’S STATUS

6.1      As a general rule, all Investors who do not comply with the criteria of the Sophisticated Investor set forth on Section 7.2, 7.3 or 7.4 hereof, will be classified as the Non-Sophisticated Investors by us.

6.2      We apply the priority protection level to the Investors classified as the Non-Sophisticated Investors. Such Investors are afforded with the greatest possible protection regarding their investment possibilities via the Platform and will be notified about the risks that may occur when investing in the Projects. Please see our Risk Warning for more information about the potential risks associated with participating in the Offers and investing in the Projects published on the Platform and using our Services.

6.3      Certain Services may not be suitable for the Investors classified as the Non-Sophisticated Investors and therefore, it may not be possible for us to carry out all possible transactions with such Investors.

7    SOPHISTICATED INVESTOR STATUS

7.1      The basic protection level is applied to the Investors classified as the Sophisticated Investors. We are entitled to assume that an Investor classified as the Sophisticated Investor has the awareness of the risks associated with investing in capital markets and adequate resources to undertake those risks without exposing itself to excessive financial consequences. We do not assess the suitability and appropriateness of the Projects to the interests of the Investors classified as the Sophisticated Investors. We are entitled to assume that an Investor classified as the Sophisticated Investor is able to independently obtain the information required to make the investment decisions in the Projects and when receiving the Services.

7.2      We will apply the Sophisticated Investor status to an Investor without receipt of the consent of the respective Investor if it possesses the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs while receiving the Services from us, and is categorized as a ‘professional client’ by virtue of point [1], [2], [3] or [4] of Section I of Annex II to the MiFID II, however provided that there is reasonable proof of its status of ‘professional client’ to us.

7.3      An Investor which is a legal person may be classified as the Sophisticated Investor based on its Request if it meets at least one of the following criteria:

7.3.1      it owns funds of at least EUR 100 000;

7.3.2      its net turnover is at least EUR 2 000 000; or

7.3.3      its balance sheet is at least EUR 1 000 000.

7.4      An Investor who is a natural person (individual) may be classified as the Sophisticated Investor based on his/her Request if he/she meets at least two of the following criteria:

7.4.1      his/her [a] personal gross income is at least EUR 60 000 per fiscal year, or [b] financial instrument portfolio, defined as including cash deposits and financial assets, exceeds EUR 100 000;

7.4.2      he/she [a] works or has worked in the financial sector for at least a year in a professional position which requires knowledge of the transactions or services envisaged (for example, see below), or [b] has held an executive position for at least 12 months in a legal person that meets criteria set forth on Section 7.3 hereof;

7.4.3      he/she has carried out transactions of a significant size on the capital markets at an average frequency of 10 per quarter, over the previous four quarters (for example, see below).

7.5      The Investors classified as the Sophisticated Investors:

7.5.1      shall provide us timely with the information on changes that occurred in their operational activities that may affect the compliance of such persons with the requirements set out for the Sophisticated Investor status under Section 7.2, 7.3 or 7.4 hereof;

7.5.2      are obliged to submit, upon our first request, the documentation that substantiates the correctness of information provided to us.

7.6  We shall apply the maximum limit EUR 100 000 for one transaction though the Platform to the Sophisticated Investor by default.

8    REGISTRATION OF THE NON-SOPHISTICATED AS THE SOPHISTICATED INVESTOR

8.1      After an Investor’s classification that is executed during the registration process and at any time during the provision of the Services, the Investor classified as the Non-Sophisticated Investor may request to change its status and to be classified as the Sophisticated Investor by submitting the Request to us. You may submit the Request via the Platform by selecting on your Account the section ‘Profile’ and then ‘Change status’, filling in the required data in the Request and submitting it to us in compliance with procedures established on the Platform, or by sending the Request to us via e-mail, if so requested by you to us.

8.2      To obtain the Sophisticated Investor status, an Investor shall comply with the identification criteria specified in Section 7.2, 7.3 or 7.4 hereof (as applicable).

8.3      Upon receipt of the Request from an Investor to be classified as the Sophisticated Investor, we will:

8.3.1      assess whether the Investor meets the identification criteria specified in Section 7.2, 7.3 or 7.4 hereof (as applicable);

8.3.2      assess the Investor’s knowledge, skills and experience and the obtained confirmation from the Investor that, taking into account the specifics of the Services, the Investor is able to make an investment decision independently and is aware of the risks involved. For us to be able to do so we may request addition information and documents from the Investor;

8.3.3      approve the Investor’s request, unless there are reasonable doubts that the information provided in the Request is not correct, complete and up-to-date;

8.3.4      explicitly notify the Investor in writing via e-mail and/or on the Platform whether and when the change of status is approved or denied.

8.4      We are entitled to deny an Investor’s request to be classified as the Sophisticated Investor without providing the reasons for the denial.

8.5      The Sophisticated Investor status granted by us according to Section 8.3.4 hereof shall have a validity of two (2) years.

8.6      The Investors that wish to maintain their Sophisticated Investor status after the expiry of the two (2) year period of validity mentioned in Section 8.5 hereof shall submit a repeated Request to us to be classified as the Sophisticated Investor. If the repeated Request has been submitted to us pursuant to terms of this Section, we will follow the steps set forth on Section 8.3 hereof.

8.7      If an Investor fails to submit a repeated Request to be classified by us as the Sophisticated Investor after the expiry of the two (2) year period of validity mentioned in Section 8.5, the default classification of the Non-Sophisticated Investor will be given to the Investor by informing the Investor about it via e-mail and/or on the Platform. In such event, the Investor will be required to take the Knowledge Test and use the Simulation.

8.8      If we from any reliable information resource receive information that an Investor no longer complies with the requirements of the Sophisticated Investor, we are entitled to revoke our decision about its status and apply the Non-Sophisticated Investor status to the Investor by informing the Investor about it via e-mail and/or on the Platform.

9   REGISTRATION OF THE SOPHISTICATED INVESTOR AS THE NON-SOPHISTICATED INVESTOR

9.1      After an Investor’s classification that is executed during the registration process and at any time during the provision of the Services, the Investor classified as the Sophisticated Investor may request to change its status and to be classified as the Non-Sophisticated Investor by submitting the Request to us.  You may submit the Request via the Platform by selecting on your Account the section ‘Profile’ and then ‘Change status’, filling in the required data in the Request and submitting it to us in compliance with procedures established on the Platform, or by sending the Request to us via e-mail, if so requested by you to us.

9.2      Upon receipt of the Request from an Investor to be classified as the Non-Sophisticated Investor, we will:

9.2.1      require the Investor to take the Knowledge Test;

9.2.2      require the Investor to use the Simulation;

9.2.3      approve the request, unless there are reasonable doubts that the information provided in the request is not correct;

9.2.4      explicitly notify the Investor in writing via e-mail and/or on the Platform whether and when the change of status is approved or denied.

10 KNOWLEDGE TEST AND SIMULATION TOOL

10.1  Prior to giving full access to the Platform and provision of the Services to the Investors classified as the Non-Sophisticated Investors, we require such Investors to take the Knowledge Test and use the Simulation.

10.2  Each Investor classified as the Non-Sophisticated Investor is required to:

10.2.1  take the Knowledge Test every two years after the initial assessment of the Investor’s knowledge was made; and

10.2.2  use the Simulation every year after the initial simulation was made.

10.3  If [a] an Investor classified as the Non-Sophisticated Investor does not provide the information required under the Knowledge Test or [b] we consider, on the basis of the Knowledge Test, that the Investor classified as the Non-Sophisticated Investor has insufficient knowledge, skills or experience, the Investor will be informed that the Services offered on the Platform may be inappropriate for it by issuing a respective risk warning on the Platform.

10.4  After an Investor classified as the Non-Sophisticated Investor has used the Simulation, an acknowledgement from the Investor will be requested confirming to us that it has received the results of the Simulation.

10.5  We will not prevent the Prospective Investors classified as the Non-Sophisticated Investors and Investors classified as the Non-Sophisticated Investors from investing in the Projects that are available on the Platform if they have not taken the Knowledge Test, however, if Prospective Non-Sophisticated Investors or Non-Sophisticated Investors have not taken the Knowledge Test and have not submitted the Simulation results, we may not provide full access to the Platform.

11 INVESTMENT LIMITS FOR INVESTORS CLASSIFIED AS THE NON-SOPHISTICATED INVESTORS

11.1   We ensure the general limit for the Non-Sophisticated Investors in an amount that exceeds the higher of either EUR 1 000 or 5 % of that Investor’s net worth as calculated according to the Simulation (if the Prospective Investor or Investor has agreed to submit these data to us through the Platform).

11.2    Based on the results of the Knowledge Test (the result of the Knowledge Test shall be at least 50% or above correct answers) and/or the results of the Simulation, upon condition that the Prospective Investor or Investor has submitted these data to us through the Platform, we are entitled to grant to the Prospective Investor or Investor the limit higher that general limit stipulated in the Article 11.1 thereof. The maximal limit for the Non-Sophisticated Investor shall be no higher than EUR 100 000,00 per one transaction. 

11.3  We ensure that each time before a Prospective Investor classified as the Non-Sophisticated Investor or Investor classified as the Non-Sophisticated Investor accepts an individual offer thereby investing an amount in the Project that exceeds the higher of either EUR 1 000 or 5 % of that Investor’s net worth as calculated according to the Simulation (if the Prospective Investor or Investor has agreed to submit these data to us through the Platform), the Prospective Investor or Investor will be:

11.3.1  receiving a risk warning informing that the investing in a Project involves the risk of losing the entirety of the money invested;

11.3.2  requested to acknowledge that it has received the said risk warning by providing an explicit consent to us;

11.3.3  required to prove to us that it understands the investment and its risks. This may be done by confirming that the information provided in the Knowledge Test taken by the Prospective Investor or the Investor is valid, correct, complete and up to date.

12 RECORD KEEPING

12.1  We maintain a record in relation to each Investor, including:

12.1.1  the classification category determined for the Investor, including information to support the categorizing;

12.1.2  evidence of informing the Investor of its classification category.

12.2  In addition to Section 12.1, hereof, we maintain a record in relation to each Investor classified as the Non-Sophisticated Investor, including, of:

12.2.1  the Knowledge Test made by the Investor, including the results of and the date of the Knowledge Test;

12.2.2  the Simulation as used by the Investor, including the results and the date of the Simulation, if the Prospective Investor or Investor has agreed to submit these data to us through the Platform.

13 REVISION AND MONITORING OF THIS POLICY

13.1  We reserve the right, at our sole discretion, to modify, amend, supplement or replace this Policy at any time. We will review and revise this Policy when there are any material circumstances arisen that may affect our ability to apply this Policy pursuant to the provisions of statutory and law requirements. What constitutes a material change will be determined at our sole discretion.

13.2  We will inform our Clients on all material amendments to this Policy by publishing the updated version of this Policy on our Platform.