The European Crowdfunding Network and its members welcome this opportunity to provide comments on the proposed European Crowdfunding Service Providers (ECSP) for Business Regulation (COM(2018)0113 – C8 0103/2018 – 2018/0048(COD)) (the “Regulation”).
These comments are based on the text proposed by the European Commission (the “Commission Text”), together with the amendments proposed in the Draft Report to the European Parliament’s Committee on Economic and Monetary Affairs (Amendments 1 to 136), the further amendments tabled by members of that Committee (Amendments 137 to 334) (together, the “Amendments”), and compromise amendments as they stand in advance of the meeting on 9 October 2018 (Compromise Amendments A through Y) (the “Compromise Amendments”).
We have assumed for purposes of this position paper that no further amendments, beyond the Amendments, may be tabled with respect to the version of the Regulation currently before the European Parliament. Where we believe a change is required that is not reflected in an Amendment, we have noted it in this document in the hopes that it will be reflected as part of the European Council deliberations and Trialogue process.
The European Crowdfunding Network wholeheartedly welcome the Regulation: believe it has the potential to make pan-European crowdfunding a reality, and that doing so will be of huge benefit to European startups and SMEs and to European investors. However, based on our extensive experience operating in this space, we believe that there are 16 key issues with the Commission Text and/or the Amendments which, if not addressed appropriately, would defeat or undermine the stated purposes of the Regulation.
Please download our full Position Paper on the Proposed Regulation on European Crowdfunding Service Providers (ECSP) for Business in PDF or read quickly a summary of our recommendations below:
- Threshold should be raised to €8 million. (Article 2(2))
- National licensing requirements for project owners and investors should not apply, ensuring that the Regulation creates a fully harmonised or 29th regime. (Article 2(2))
- Definition of “crowdfunding services” should be modified to align with existing practice, both in view of lending-based and investment-based crowdfunding. (Article 3(1)(a))
- SPVs should be permitted to (1) hold multiple assets when professional investors or eligible counterparties are investing and (2) structure as omnibus nominee/trustee arrangements. (Article 4(5))
- Conflicts of interest should not prohibit CSPs from having certain types of financial participation in their projects. (Article 7)
- Conflicts of interest should not prevent employees, managers and shareholders of CSP from investing pari passu in projects. (Article 7)
- Payment services restrictions should be clarified to ensure that CSPs can facilitate payment flows, but that they must conduct AML checks. (Article 9(2))
- Register of individual projects should not be required. (Article 11).
- Entry tests should be based on appropriateness rather than suitability, and the outcome of an investor’s simulation should not mandate the investor’s exclusion. (Article 15)
- Investment caps should not be applied. (Articles 15 and 16)
- KIIS content requirements should differ between platform- and project-focused. (Article 16)
- KIIS responsibility for correctness should stay with the project owner in case of a projectfocused KIIS. (Article 16)
- Bulletin boards should allow for binding reference prices and, in the case of lending-based platforms, a more comprehensive, platform-managed secondary market structure. (Article 17)
- Marketing and communication restrictions should be modified to allow general communications about live projects. (Article 19(2))
- Due diligence requirements should not specify the information required. (New)
- Default rates disclosure should apply only to lending-based platforms. (New)
This position paper explains each of these 16 points in detail, and it provides our views as to the modifications to the Commission Text that should (or should not) be made in order to achieve the optimal outcomes.