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Europe's Crowdfunding Regulation - some details

Regulatory team, French AMF, Paris, 30 November 2020


The European Regulation (EU) 2020/1503 of 7 October 2020 on European crowdfunding service providers for business, accompanied by the Directive (EU) 2020/1504 amending Directive 2014/65/EU on markets in financial instruments, was published in the Official Journal of the European Union on 20 October and is now therefore EU law.

The regulation, which became law in every EU country as soon as it appeared in the OJ, creates a single European authorisation for the provision of crowdfunding services, granted to providers upon approval by the competent authority. Once approved, a crowdfunding service provider may offer crowdfunding services in the form of crowdequity and/or crowdlending, depending on the scope of its authorisation.

The regulation is due to become applicable on 10 November 2021. As from that date, existing platforms that want to continue to provide crowdfunding services will have 12 months, i.e. until 10 November 2022, to obtain the authorisation of European crowdfunding service provider. The EU can extend this transitional period for a further 12 months, i.e. until 10 November 2023, if it likes. At the end of this transitional period (whenever that comes), only crowdfunding service providers authorised in accordance with the regulation will be able to offer crowd equity or crowd lending services in Europe.

In France, this scheme will replace the existing Conseillers en investissements participatifs (CIP) and Intermédiaires en financement participatif (IFP) regimes.

New obligations

Crowdfunding service providers will be subject to various organisational and transparency requirements as regards prevention of conflicts of interest, due diligence and complaints handling. In addition, two new categories of investors are created and defined by the Regulation: sophisticated and non-sophisticated investors. Non-sophisticated investors benefit from additional and appropriate investor protection safeguards before they can invest, including: a knowledge test, a simulation of the ability to bear losses and a specific warning for any investment exceeding a certain amount. In addition, a pre-contractual reflection period of 4 days allows non-sophisticated investors to cancel their offer to invest or expression of interest in a crowdfunding offer.

Key points to remember:

  • Crowdfunding projects offered on the platform must concern business activities.
  • The maximum amount that can be raised by a project owner is set at €5 million over 12 months throughout the European Union.
  • Each crowdfunding offer is subject to a six-page key investment information sheet whose content is standardised. This document is not approved by a competent authority.
  • The regulation does not prohibit the exercise by crowdfunding service providers of other regulated activities under other regulated statuses (such as the investment firm status), provided that the rules applicable to those other statuses allow it and that the provider has obtained the relevant authorisations.

Finally, crowdfunding service providers may operate a bulletin board enabling their clients to express interest in buying or selling loans or securities that were originally offered on their crowdfunding platforms.

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