On 5 October 2020, the European Parliament adopted the final text for a “Regulation on European Crowdfunding Service Providers (ECSPs) for Business” (Regulation 2020/1503 or the “Regulation”). The Regulation will come into effect on 10 November 2021. Generally speaking, it aims to help crowdfunding services function smoothly in the single EU market and foster cross-border business funding in the region by setting up a single set of rules on the provision of investment-based and lending-based crowdfunding services.
The Regulation will apply to all crowdfunding service providers facilitating business funding and investment-based platforms dealing with transferable securities for campaigns raising up to €5 million. Larger operations will be regulated by the Markets in Financial Instruments Directive (MiFID II Directive) and the Prospectus Regulation (EU) 2017/1129. Lending to consumers is not covered by the Regulation, while reward and donation-based crowdfunding also fall outside the scope of the rules.
The Regulation introduces provisions on the following issues, among others:
- Authorisation and supervision of crowdfunding service providers;
- Cross-border activity for ECSPs that wish to scale their operations at a European level;
- Organisational and operational requirements for crowdfunding service providers, including outsourcing, complaints handling, conflicts of interest, provision of asset safekeeping services, payment services and reporting;
- Information to clients such as the Key Investment Information Sheet (KIIS);
- Investor protection, and;
- Transparency and marketing communications related to the provision of crowdfunding services in the EU.
Next Steps
The Regulation provides for transitional arrangements so that persons providing crowdfunding services in accordance with their national law now fall within the scope of this Regulation and can adapt their business activities to comply with the Regulation. This transitional period will last until 10 November 2022. Up until then, member states can set up special procedures to enable legal persons, which have been authorised under national law to provide the crowdfunding services included within the scope of the Regulation, to convert their national authorisations into authorisations under this EU-wide rule.
How can Complyport EU (formerly MAP S.Platis) assist you?
Complyport EU (formerly MAP S.Platis) can provide comprehensive and holistic solutions tailored to each client’s individual needs, including:
- Assistance and support in obtaining authorisation as a crowdfunding service provider;
- Consulting services and guidance to authorised crowdfunding service providers;
- Assistance in ensuring money laundering compliance;
- Assistance in preparing the Key Investment Information Sheet (KIIS);
- Provision of answers to relevant queries (Q&A Service), and;
- Regulatory updates.
For more information about the new Regulation, please visit our dedicated crowdfunding webpage.
