EU Crowdfunding Regulation: applicable from 10 November
The Regulation on European Crowdfunding Service Providers for Business, which shall enable crowdfunding platforms to offer their services across the EU, becomes applicable on 10 November.
The new Regulation
The Regulation (EU) 2020/1503 on European Crowdfunding Service Providers for business (the Regulation) was adopted on 5 November 2020 and entered into force on 10 November 2020. For the legislative text of the Regulation, see here. This new legislation is driven by a desire to create a more accessible market with a single EU regime, thereby removing diverging national rules with respect to crowdfunding service providers within the European Union.
Applicability from 10 November 2021
From 10 November 2021 the new provisions under the Regulation will be directly applicable enabling crowdfunding platforms to offer their services across the EU.
In short, this Regulation shall apply to crowdfunding services provided to non-consumer project owners in an amount up to EUR 5 million (calculated per 12 months per project owner). A prospective crowdfunding platform will need to request authorisation from the national competent authority of the member state in which it is established. Further to notification the crowdfunding service provider can also provide services in other EU member states. ESMA shall maintain a register of crowdfunding service providers.
The Regulation includes provisions on investor protection, such as the introduction of a ‘knowledge test’ for ‘non-sophisticated’ investors and the provision of a ‘key investment information sheet’ for investors for each crowdfunding offer or at platform level. Crowdfunding service providers will need to provide prospective project owners clear information about the financial risks and charges they may incur, including insolvency risks and project selection criteria. Furthermore, the Regulation contains provisions in respect of organisational and operational requirements for crowdfunding service provider, such as outsourcing, complaints handling, conflicts of interest, marketing communications, provision of asset safekeeping services and payment services and reporting.
In anticipation of the application date 10 November 2021, the DNB published an update on its website with information on the consequences of the new regime, in particular the new prudential requirements for crowdfunding service providers, which fall under the supervision of DNB. To view the DNB update (in Dutch only), see here. The AFM has also published an update on its website, noting that applications for licenses as a crowdfunding service provider may be submitted to the AFM from 10 November 2021. To view the AFM update (in Dutch only), see here.
Crowdfunding service providers who have an existing license or exemption from the AFM may make use of a transition period. Such crowdfunding service providers can continue to operate under national law until 10 November 2022 from which date a license under the Regulation is required. The AFM notes on its website that such parties may submit the request for a license under the new Regulation from 10 November 2021 until 10 May 2022 as the AFM then expects to be able to finalise the application process on time (i.e. by 10 November 2022).
Should you require any assistance in the field of Financial Regulatory, please contact your trusted adviser of our Financial Regulatory Team
Vanessa MarquettePartner Attorney at Law
Vanessa Marquette, attorney at law, is a partner in the Banking and Finance Practice Group of our Brussels office and a member of the firmwide Restructuring & Insolvency team. She is recognized for her expertise in Banking and Finance with a focus on international finance law, regulated financial services, sustainable finance and banking litigation.T: +32 2 773 23 25 E: [email protected]
Michael SchweigerPartner Attorney at law / Avocat à la Cour / Solicitor
Michael Schweiger, partner, is a member of the Banking & Finance practice group in our Luxembourg office. He leads the Luxembourg financial regulatory team and regularly advises banks, e-money and payment institutions, insurers, and other clients regarding financial regulation.T: +352 466 230 520 E: [email protected]