Last Thursday, December 19th, we reached an important agreement that defines a set of criteria applicable to all ECSP – European Crowdfunding Service Providers that raise up to EUR 5 million per year.
Crowdfunding is a relatively recent phenomenon which has quickly consolidated itself as an interesting fundraising source for startups and innovative SMEs. However its development in Europe is hindered by the fact that each Member State has completely different rules to activate this tool.
For this reason the measure approved on Thursday represents a significant step forward for the development of the crowdfunding sector, which will allow it to grow and ensure that investors will be able to benefit from safeguards and rights they did not enjoy previously.
The issue of transparency and investor rights has been a central theme of the regulation. Investors will for instance be provided with a key investment information sheet (KIIS) in which Crowdfunding service providers would need to give clients clear information about the financial risks and charges they may incur, including insolvency risks and project selection criteria.
In addition, investors identified as non-sophisticated would be offered more in-depth advice and guidance, including on their ability to bear losses and a warning in case their investment exceeds either 1000 EUR or 5% of their net worth, followed by a reflection period of four calendar days.
On the regulatory and authorisation front, negotiators decided that a prospective ECSP would need to request authorisation from the national competent authority (NCA) of the member state in which they are established. Through a notification procedure in a member state, ECSP would also be able to provide their services cross-border. Supervision would also be carried out by NCAs with the European Securities and Markets Authority (ESMA) facilitating and coordinating cooperation between member states. ESMA’s role, and to a lesser extent that of the EBA, was strengthened in areas such as binding dispute mediation, data collection from NCAs in order to produce aggregated statistics and development of technical standards.
The full text has not been published by the European Parliament yet, but as soon as it is available you will find the approved version here.