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ECSPR

European Dimension

by EUROCROWD on 03.05.2024

If you are a crowdfunding platform, an entrepreneur, or an investor, then you should look this series of articles on the European Crowdfunding Regulation (ECSPR).
The ECSPR is a game-changer. It harmonizes rules across the EU, creating a level playing field for crowdfunding services. In these notes, we break down the jargon, demystify legal intricacies, and provide practical insights.
Today we are going to talk about the information for investors. Crowdfunding platforms act as financial gateways, requiring transparent information to ensure investors make informed decisions, not ones based on hype or hidden risks. Fair and objective presentation safeguards both investor trust and the platform's reputation.
Compliance isn't optional; it's crucial. Be empowered with knowledge with EUROCROWD.

Sixth

European Dimension

According to a recent crowdfunding market study conducted by our member LenderKit via its crowdfunding platform aggregator CrowdSpace and academic partners, 82.6% of the platforms in the European Union provide services in only one country. ECSPR now makes it much easier for platforms to expand their business. It just depends on whether they want to take that opportunity. And so far, platforms have apparently not been very European in their strategy.

Cross-border submission

Where a crowdfunding service provider authorised intends to provide crowdfunding services in a Member State other than the Member State whose competent authority granted authorisation, it shall submit to the competent authority by the Member State where authorisation was granted the following information:

  • A list of the Member States in which the crowdfunding service provider intends to provide crowdfunding services.
  • The identity of the natural and legal persons responsible for the provision of crowdfunding services in those Member States.
  • The starting date of the intended provision of the crowdfunding services by the crowdfunding service provider.
  • A list of any other activities provided by the crowdfunding service provider not covered by this Regulation.

Communications between national authorities

The single point of contact of the Member State where authorisation was granted shall, within 10 working days of receipt of the information, communicate that information to the competent authorities of the Member States in which the crowdfunding service provider intends to provide crowdfunding services and to ESMA.

Communication to the crowdfunding service provider

The single point of contact of the Member State where authorisation was granted shall thereafter inform without delay the crowdfunding service provider of the communication exchanged between national authorities.

Start of the cross-border services

The crowdfunding service provider may start to provide crowdfunding services in a Member State other than the one whose competent authority granted authorisation from the date of the receipt of the communication or at the latest 15 calendar days after submitting the information.

Conclusion

It has never been easier for a crowdfunding platform to provide services in other EU countries. This makes borders, from a crowdfunding point of view, non-existent; beyond the tax obligations that may exist, which of course are more than surmountable.

In fact, the main stumbling block for the platforms would be, in any case, the language, in case it is not spoken in the target country. This will add operational cost in most cases.

But, on the plus side, it is important to note that any platform can advertise in any member state and start their business within a maximum period of 15 days. No authorization is required. This is done simply by informing the national competent authority in their home country.

According to the ECSPR register published by ESMA in January 2024, just 10% of the platforms had sought to provide services in the 27 Member States, even though cross-border transactions were a key reasoning for the creation of this law.

Will European crowdfunding platforms make use of the vast opportunity handed to them within this law, which after all is in force since the year 2021. The uptake of and transition into the law has been slow, but with the legal transition period having ended in late 2023, ESMA now addressing regulatory convergence with member state authorities, it is fair to assume that the success of the market will be largely up to those platforms that dare to succeed.

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