BALKANIKA FINANCE S.R.L., operating under the laws of the Republic of Moldova, with its headquarters located at: Republic of Moldova, Chișinău municipality, str. Kiev, 9/1, registered in the State Register of legal entities under the state identification number: 1023600051022 from 31.10.2023 (hereinafter referred to as Balkanika), as a provider of crowdfunding services through the crowdfunding platform: https://balkanika.finance/ (hereinafter referred to as the Platform), taking into account the provisions of Law no. 181/2023 regarding crowdfunding services (hereinafter Law no. 181/2023) and its subordinate normative acts, applies this Conflict of Interest Prevention Policy (hereinafter referred to as the Policy) in the process of providing crowdfunding services to the Platform's clients.

The Policy establishes rules for identifying and preventing conflicts of interest in Balkanika's activities and is adapted according to Balkanika's current size and internal organization. The Policy is evaluated and reviewed at least once a year, including for the purpose of timely taking all appropriate measures to remedy any identified deficiencies, as well as considering the nature, scope, and complexity of Balkanika's activities.

Persons holding responsible positions within Balkanika are verified to meet the requirements of Law no. 181/2023. In this regard, they complete and sign a declaration (annexed to the Policy) under their own responsibility, stating that they are not in any incompatibility situations. The appointment of persons to responsible positions is approved in advance by the supervisory authority, in accordance with its normative acts.

Balkanika takes all measures to prevent, identify, and disclose conflicts of interest between Balkanika, associates, persons with responsible positions, and any natural or legal person linked to them by a control relationship, as defined by applicable legislation, and its clients, or between one client and another.

Balkanika's administrator ensures compliance with legal conditions regarding the prevention of conflicts of interest and takes necessary measures to identify, assess, monitor, and eliminate them, in a manner that promotes market integrity and client interests.

The administrator and all Balkanika employees, in the process of evaluating clients, offers, and all transactions concluded on the platform, ensure that the persons provided for in art. 14 para. (1) of Law no. 181/2023 are not accepted as project developers within crowdfunding projects and/or as consumer debtors; identify any other circumstances that may generate a real or potential conflict of interest between the persons provided for in art. 14 para. (1) of Law no. 181/2023; if applicable, specify the procedures to be followed and the measures to be adopted to comply with the requirements provided in art. 14 of Law no. 181/2023, including procedures and measures related to relevant internal responsibilities within the provider.

Conflicts of interest can arise in various situations. Potential sources of conflicts of interest that Balkanika takes measures to exclude or minimize are as follows:

1. Potential conflict of interest situations between Balkanika's founders and clients (investors or developers/debtor-consumers)

1.1 Potential Self-Financing of Founders' Projects:

A conflict of interest may arise when a founder or management member has personal businesses or projects and seeks to fund them through the platform without disclosing this fact. This can create risks because:

The founder may favor their own projects over other investment opportunities available on the platform. Investors may unknowingly fund deals directly related to the platform, exposing them to additional risks.

1.2 Potential Manipulation of Loan Conditions:

Founders may have access to inside information and could alter loan terms to favor certain entities or borrowers in which they have a financial or personal interest. Loan terms may be adjusted to provide more favorable conditions to borrowers with whom the founder has a personal or financial relationship, to the detriment of investors who receive lower-than-fair returns.

Risks associated with these loans may be understated in reports provided to investors.

1.3 Potential Selection of Projects Based on Self-Interest:

Another possible conflict of interest may arise if founders select only certain projects to be presented on the platform, prioritizing those from which they can derive additional benefits:

Projects proposed by the founder’s friends, family members, or business partners may be prioritized, even if they do not offer the best conditions for investors. This can lead to a lower quality of available investments and reduced diversification of funding opportunities for clients.

1.4 Potential Use of Inside Information:

Founders may have access to non-public information about borrower or project performance and could use it for personal gain. For example: A founder might withdraw their own investment from a financially struggling project before this information is publicly disclosed, leaving other investors to bear the losses.

1.5 Potential Hidden Fees and Charges:

The founder or management may structure fees and charges in a way that benefits the company at the expense of investors or borrowers. The platform might impose excessive fees or hide additional costs, reducing real returns for investors. Borrowers may face hidden costs or unfavorable terms that were not clearly disclosed when the loan was issued.

1.6 Potential Concentration of Risk in Certain Projects:

A conflict of interest may arise when the founder has financial interests in specific economic sectors or industries and directs a significant portion of project funding into those areas. Investors may face concentrated risks instead of benefiting from proper investment diversification. In the event of an economic downturn in that sector, investors may face significantly higher losses.

1.7 Potential Prioritization of Self-Interest in Bankruptcy:

If the platform experiences financial difficulties, the founder may be tempted to protect their own interests before those of investors. For example: The founder might attempt to recover their own investments or funds before distributing remaining assets to investors. As a result, investors could suffer greater losses while the founder minimizes their own financial damage.

1.8 Potential Lack of Transparency in Risk Assessment:

The founder may choose not to fully disclose risks associated with certain funding projects to attract more investment. This lack of transparency could mislead investors, preventing them from making fully informed investment decisions.

2. Potential conflict of interest situations between the platform and investors:

2.1 Potential low quality of projects published on the platform: the platform may have an interest in publishing as many projects as possible, even high-risk ones, in order to maximise its gains, to the detriment of the interests of investors who want safer projects.

2.2 Potential lack of transparency: if all necessary information is not provided (or may be selective) on borrowers' financial data, which may lead to inappropriate investment decisions by investors.

2.3 Potential subjective or incomplete risk assessments: if the platform were to favour certain projects despite the obvious risks, investors could suffer significant losses.

3. Potential conflict of interest situations between developers/debtor-consumers and investors:

3.1 Potential incomplete or inaccurate information: borrowers may not provide full details of their financial situation, which may mislead investors, and the platform in this case may be suspected of negligence for not having properly verified this information.

3.2 Potential prioritisation of certain borrowers: whether the platform would favour large borrowers or those that offer advantageous terms to the platform, which may reduce the visibility of small or innovative projects that may present lower risk to investors.

4. Potential conflict of interest situations between investors:

4.1 Potential for unequal access to investment opportunities: if the platform were to prioritise large investors' access to the best investment opportunities at the expense of small investors. This may create inequities and reduce the chances of small investors to win.

4.2 Potential reduced liquidity of investments: if the possibility to withdraw investments would be limited, or if certain categories of investors would benefit from better withdrawal or liquidity conditions, adversely affecting other investors.

5. Potential conflict of interest situations between the platform and the debtors:

5.1 Potential selection of borrowers: the  platform may favour certain borrowers (either because they pay higher fees or for other advantages) over other borrowers with more valuable or less risky projects for investors.

5.2 Potential (high) fees charged to borrowers: hypothetically high fees may be imposed on borrowers, which may lead to difficulties in repayment of loans. This may also affect investors, who do not receive repayments on time or at all.

5.3 Potential lack of support in the event of insolvency: if the platform did not provide sufficient protection mechanisms for debtors in the event of financial difficulties, which may escalate the situation to the detriment of both parties.

5.4 Potential complex commission structures: if complicated commission structures were to be used, it would become difficult for investors to understand exactly how gains and risks are shared. This may create conflicts of interest, especially if the platform maximises its profits at the expense of investors or borrowers.

Avoiding conflicts of interest in Balkanika's business is essential to comply with regulatory requirements and to ensure the integrity of the platform, as well as to maintain customer confidence.

The measures Balkanika implements to minimise or avoid conflicts of interest are as follows:

1. Strict compliance with the provisions of Law no. 181/2023 and subordinated normative acts, including those of the supervisory authority (National Commission for Financial Markets).

2. Maximum transparency: 

1) Clear and detailed information: the platform provides investors with access to all relevant information about loans and developer/borrower-borrower information, including credit rating (score), financial history and risks associated with each project, to enable investors to make informed decisions.

2) Clear public policies: the platform publishes clear policies on how crowdfunding projects are evaluated and publicised on the platform, about any potential conflicts of interest and how conflicts of interest are managed.

3. Strict regulations and external supervision

1) Activity authorised by the supervisory authority: platform operating under

regulations of the supervisory authorities, which monitor the platform's activity and can impose sanctions in case of unresolved conflicts of interest.

2) External audits: conducting regular external audits in accordance with Law 181/2023 in order to verify the compliance of the platform's (activity) with the regulations and procedures in force, including in terms of assessing and mitigating the risks of conflicts of interest.

4. Separating the interests of the platform from those of investors and developers/debtor-consumers:

1) In order to prevent, identify and disclose conflicts of interest between the platform, the founders of Balkanika, the persons in positions of responsibility and any natural or legal person linked to them by a controlling relationship within the meaning of Article 6 of Law no. 171/2012 on the capital market, and Balkanika's clients or between a client and another client (Article 14 para. (1) of Law No. 181/2023), persons whose main functions involve carrying out activities on behalf of clients or providing services to clients whose interests may conflict or who otherwise represent different interests that may conflict, including those of Balkanika shall be separately supervised by the (credit) expert committee. 

In any case, Balkanika does not recognise any of the following situations:

(a) directly or indirectly hold a stake in the equity offers placed on its own platform;

(b) to place equity financing offers from developers holding at least 20 per cent of the share capital of Balkanika, persons holding positions of responsibility or any

natural or legal persons linked to them by control within the meaning of the applicable legislation;

c) engage in activities that may give rise to a conflict of interest or improperly use or disclose confidential information;

d) there is any direct link between the remuneration of the persons referred to in Article 14, paragraph.

(1) of Law No 181/2023 carrying out an activity and the remuneration they receive or the income they generate, who mainly carry out another activity, where a conflict of interest may arise in relation to those activities;

e) the exercise by any person of improper influence over the manner in which the persons referred to in Article 14 para. (1) of Law 181/2023, provide participatory financing services;

f) simultaneous or successive involvement of the persons referred to in Article 14 para. (1) of Law no. 181/2023, in the provision of participatory financing services, where such involvement could affect the proper management of conflicts of interest.

In any event, Balkanika does not accept to pay or receive any non-pecuniary remuneration, discounts or benefits for the purpose of channelling investors to a particular developer/consumer-debtor or developer/consumer-debtor offerings on the Balkanika platform to particular investors or to a particular equity crowdfunding offering on a third party platform.

Pursuant to the regulatory legal norm, shareholders holding at least 20% of the share capital or voting rights, as well as persons holding positions of responsibility in Balkanika or any person affiliated to them, are prohibited from entering into equity financing transactions offered on the Balkanika platform. 

2) Segregation of duties: every operation on the platform is executed, monitored and controlled according to the "four eyes" principle, and the most important ones are checked and accepted by the (credit) expert committee, so that decisions are taken without undue influence.

5. Clear project selection policies:

1) Standardised evaluation process: the platform has a standardised and well-documented process for the evaluation of participatory funding projects and their publication on the platform. This helps to eliminate favouritism or arbitrary selections that might favour certain projects over others.

2) Credit risk assessment: by providing standardised and transparent risk scores (ratings) for each project (to assess the risks of each loan), which are assessed according to the Balkanika approved Methodology.

6. Clear and fair commission policy:

6.1 Transparent fees: the Platform has clearly defined its fee structure (Platform tariffs) and published them on the Platform so that customers know exactly in advance what they will pay and how the costs are distributed.

6.2 Prohibition of hidden fees: the platform avoids hidden commission practices and does not charge additional fees not previously announced. All fees and commissions are disclosed in advance by publication on the platform and (for them to be applicable) acceptance by clients.

7. Protection for investors and small borrowers:

7.1 Equal access to opportunities: the Platform implements policies that provide equal access to all investment opportunities, regardless of the size of the investment. This prevents situations where large investors have priority access to the most favourable projects.

7.2 Investment diversification instruments: by providing instruments that allow investors to diversify their investments across several projects to minimise risk and avoid concentrating on a small number of risky loans.

8. Approved activity policies, including confidentiality:

8.1 Rules of activity approved and published: the platform has approved Rules of activity that clearly define the rules for the platform, Balkanika employees and clients, ensuring that they do not favour certain developers/ debtor-consumers or investors at the expense of others.

8.2 Privacy policies: the platform ensures that sensitive customer information is not misused or shared with third parties in an unwarranted manner, but in accordance with relevant legislation, contracts and approved privacy policy.

9. Mechanism for resolving customer complaints:

9.1 Customer Complaints Review and Resolution Rules: the platform provides customers with a clear and fast mechanism to lodge complaints, including if they believe they have been affected by a conflict of interest. This mechanism is managed independently to ensure impartiality, in accordance with the Rules approved by Balkanika.

10. Using technologies for transparency and monitoring:

10.1 Logging of actions on the platform: the implementation of technologies including electronic logging of all actions on the platform contributes to a transparent and immutable system of transaction tracing, reducing the risk of data manipulation.

10.2 Automating work processes: through the use of automated algorithms and credit score modelling helps to reduce human influences that can create conflicts of interest in work processes.

11. Educating investors and borrowers:

11.1 Financial education programmes: by providing educational resources to customers so that they are better informed about risks, rights and obligations. A well informed community is less susceptible to conflicts of interest and can make better choices.

The measures taken by Balkanika in accordance with the provisions of Article 14 para. (1) of Law No 181/2023 shall guarantee, with reasonable certainty, the prevention of risks of damage to a client's interests and, if this is not possible, the appropriate mitigation of such risks.

In any case, for the purpose of identifying conflicts of interest that may arise in the provision of participatory financing services and that may harm the interests of a client, Balkanika shall consider, as a minimum condition, whether any of the persons referred to in Article 14 para. (1) of Law 181/2023:

1) could realise a financial gain or avoid a financial loss at the client's expense;

2) has an interest in the outcome of a customer's service that is different from the customer's interest in that outcome;

3) has a financial or other incentive to favour the interests of one client or group of clients over the interests of another. The minimum disclosure shall contain a specific and clear description of the conflicts of interest and associated risks identified in the context of a particular service, considering the nature of the clients to whom the information is disclosed, in particular their status as potential sophisticated or potential non-sophisticated investors.

Balkanika shall disclose to clients and potential clients, by prominently displaying on its platform information on the general nature and sources of conflicts of interest and the measures taken to mitigate these risks, so as to enable each client to make an informed decision about the service in the context of which the conflict of interest arises. This information shall be updated as often as necessary, but no less frequently than annually.