The European Commission has proposed a crowdfunding regulation that would enable cross-border peer-to-peer business lending and investment-based crowdfunding. Rather than interfere with national regimes, the regulation is intended to enable platforms to apply to ESMA for an EU "label" or right to operate throughout the EEA on conditions that are more proportionate than some of the harsher national regimes (e.g. those applying MiFID).
The regulation would not apply to platforms that facilitate consumer loans/mortgages or donation/reward-based crowdfunding, or to platforms that are already authorised as investment firms. There would be a limit of €1m on the total amount of each fundraising.
The Regulations would require effective and prudent management; complaints handling; management by people with appropriate skills and professional experience; the detection and prevention or management of conflicts of interest. There are also rules on outsourcing and client asset safeguarding. There would need to be an initial appropriateness assessment for each investors, and a "key investment information sheet" for each investment opportunity. Communications would need to be "clear, comprehensible, complete and correct." Secondary trading would need to occur via a "bulletin board" on the platform rather than a "trading system".
It is not clear when the Regulations might be made final, but they would take effect just over 12 months after publication.
All very much academic for UK-based platforms, fundraisers and investors if Brexit goes ahead...
