The European Parliament’s Economic and Monetary Affairs Committee (ECON) has voted to approve new rules which will streamline the responsibilities of crowdfunding platforms and protect investors.
The new regulations, aimed at helping crowdfunding platforms function smoothly across the EU and promoting cross-border business funding, set out a single set of rules to cover the provision of crowdfunding services. The rules include:
- The maximum threshold of each crowdfunding offer will increase from €1 million to €8 million.
- Service providers at crowdfunding platforms should provide clear information about the risks and charges related to investing in a project and take measures to minimise these risks.
- ECON MEPs recommend that service providers also disclose the annual default rate of projects on their platforms.
- Project owners should provide a key investment information sheet for each project to investors.
- Safeguards must be put in place to prevent crowdfunding platforms being used to facilitate money laundering and terrorism funding.
Crowdfunding service providers will continue to have a very limited capacity to participate in crowdfunding efforts on their platforms; and where they do so they must make the information available to clients far in advance of investing. Crowdfunding platforms must ensure clients are able to file complaints against them free of charge. To this end, they must provide a form template for complaints to be filed and keep records of complaints received and the measures taken to address them.
Prospective European crowdfunding service providers must request authorisation from the National Competent Authority (NCA) of the Member State where it is based, rather than the European Commission’s initial suggestion of leaving responsibility for authorising crowdfunding platforms to European Securities and Markets Authorities (ESMAs) – each Member State will be responsible for designating its own NCA and will inform its ESMA of the designation.
Crowdfunding has become increasingly prevalent as a source of funding for startups and small to medium enterprises, helping them through the difficult early stages of business growth.