There are several aspects that need clarification regarding ECSPR. Many of those are best dealt with in confidential exchanges with stakeholders. But here, we want to outline aspects that are of general concern and concern the public perception of the sector. We will address these in due course in an informal way here, titled ECSPR Monitor, and without the aim to answer issues or to provide undue insight into ongoing operational hurdles within the market or discussions with authorities. Yet, we believe that raising several points over time will help the whole sector in implementing ECSPR better.

The European Commission published its draft European Crowdfunding Service Provider (ECSPR) in 2018. The EC at the time suggested that several hundred crowdfunding platforms existed in one or the other way across the Union. Over the following two years, with the counter proposals of the European Parliament and the Council a public discourse on ECSPR was held involving a variety of stakeholders. Following the trialogue between the three European Commission, the European Parliament and the Council, a final version was agreed on and was signed into European law at the end of 2020. In November 2021 the law became effective across the European Union, with a transition period for those crowdfunding platforms already operating under national laws until November 2022. Roughly one year ago, in April 2022, the first such license was granted.

The deadline for crowdfunding platforms offering loans or investments under national licenses to transit into the new law was extended by one year in Summer 2022, largely based on the unsatisfactory national implementation and preparation by member state authorities in only a handful of countries and will now have a final deadline in November 2023. To date, there are still just 29 licensed crowdfunding service providers (CSP) according to ESMA, the only official and public source for this information (ESMA lists 30 CSPs but one of these twice). Is the transitioning process going smoothly or are the involved actors, from competent authorities to platform operators, not adequately coping with the process? We have ongoing discussions with many of our members within our ECSPR Professional Group, an internal working group for ECSPR licensed service providers and those in the application process.

Below we will share some basic compliance aspects as visible to the public. Looking at the list of licensed ECSPR platforms as per ESMA – and we consider only those that are published by ESMA as being licensed, though we are aware that the reporting from conduct authorities to ESMA at times can be laggy. We reviewed these to understand how they comply with the basic intentions of ESCPR regarding transparency and consumer protection. While ECSPR demands some actions of platforms toward investors and project owners on their website, others are linked to consumer protection but do not demand specific action. As consumer protection and transparency are the main pillars of ECSPR, we consider any clear mention of these as a requirement intended within the spirit of the law.

Reviewing basic consumer protection and transparency aspects as outlined within ECSPR, we surveyed 27 crowdfunding service providers’ websites in April 2023. We reviewed these websites about basic compliance with aspects outlined within the main legal text of ECSPR. We did this to identify how CSPs are using the improved and professional rulebook when approaching clients, both investors and project owners. We defined a few information points from within the legal text and reviewed the websites to this regard of which 14 are shown below in the graph. The information provided by CSP in some points includes aspects that are required within the licensing process and partly also published within the CSP register by ESMA.

We find that only one data point was answered by all 27 CSP, while two data points were only answered by one CSP. The average number of CSP answering all data points is 18.6, while the Median is 20.5. Overall, we believe it to be unsatisfactory, that on average only around two-thirds of licensed CSPs as published by ESMA are informing their users of key transparency and consumer protection aspects. The only data point answered by all CSP is the name and address of the underlying business. While most CSP are also showcasing their management and external advisors, only 25 informed visitors of the fact that they were licensed under ECSPR. Of those in 20 cases a license for dealing with tradeable securities was mentioned and in 17 for loans.

Maybe the most concerning aspect is that only one CSP informed users that they have a continuity plan addressing the risks associated with its own failures. We did not seek out details of any such plan; we only sought to see if CSP would acknowledge the risk of platform failure and how to deal with this to their users. Given the increasing regulatory burden under ECSPR, with additional rules coming with the Digital Operational Resilience Act (DORA) (Regulation (EU) 2022/2554) as of January 2025, there seems an urgency for CSPs to address and to own operational shortcomings.

We also noted that only one CSP marked its offerings clearly and separate regarding ECSPR, as clarified within the relevant Q&As by ESMA, and other licenses it might hold, while a total 17 CSP indicated on their websites that they operate also under other licenses. As indicated above, from the granting of an ECSPR licence onward, the CSP has one year to ensure it fully complies with the plans outlined. With the first CSP holding its license now for one year, we are keen to see if National Competent Authorities and ESMA can fulfil their role in upholding compliance and if or when they will seek to reprimand CSP or withdraw licenses.

Below you find key findings from this month’s ECSPR Monitor. There are many additional compliance questions that can and are being raised from this, which we will take up directly with the relevant authorities. We are grateful to the members of our ECSPR Professional Group for their open exchanges and input on key compliance aspects.

Basic compliance with ECSPR by licensed CSP as per their websites (April 2023)