European CMU: Preliminary deal reached on new rules for crowdfunding platforms

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European CMU: Preliminary deal reached on new rules for crowdfunding platforms

20 December 2019

Regulatory News Alert

On 19 December 2019, Finland's presidency of the Council and the European Parliament reached a political agreement on a new framework facilitating the provision of services across the EU for crowdfunding platforms.

The initiative is part of the European Capital Markets Union (CMU), which aims to deepen and further integrate the capital markets of the EU Member states. More specifically, the objectives of the CMU are to:

  • Provide new sources of funding for businesses, especially for small and medium-sized enterprises
  • Reduce the cost of raising capital
  • Increase the options for savers across the EU 
  • Facilitate cross-border investing and attract more foreign investment into the EU
  • Support long-term projects
  • Make the EU financial system more stable, resilient, and competitive.

The now agreed crowdfunding framework addresses in particular the first objective, i.e. providing easier access to new financing sources.

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Crowdfunding framework

The new rules for crowdfunding platforms are part of the implementation of the European Commission’s Action Plan on Building a Capital Markets Union, published in 2015, which sets out the Commission’s priorities for strengthening EU investment for the long term.

In particular, the rules will remove barriers for crowdfunding platforms to operate cross-border by harmonising the minimum requirements when operating in their home market and other EU countries.

Furthermore, the agreed rules will increase legal certainty through common investor protection rules. The text sets outs common prudential, information, and transparency requirements. It also includes specific requirements for non-sophisticated investors. At the same time, the rules for EU crowdfunding businesses differentiate between the provision of funding in the form of a loan or an investment (through shares and bonds issued by the company that raises funds).

Lastly, the framework defines common authorisation and supervision rules for national competent authorities. The European Securities and Markets Authority (ESMA) will play a major role in facilitating coordination and cooperation, having tools such as a binding dispute mediation mechanism and the development of technical standards at its disposal.

 

Scope of the agreed deal

The new rules as agreed by the Presidency and the Parliament will cover crowdfunding campaigns of up to EUR 5 million over a 12-month period.

Larger operations will fall into the scope of the Markets in Financial Instruments Directive (MiFID) and the Prospectus Regulation, while reward- and donation-based crowdfunding are explicitly excluded from the scope of the proposed framework.

 

Next steps

The text will be finalised from a technical perspective and, in a next step, submitted to EU ambassadors for endorsement with a view to reaching an agreement in the form of a (pre-negotiated) Council position at first reading. After a legal linguistic revision, Parliament and Council will then be invited to adopt the proposed regulation as an 'early second-reading agreement'.

 

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Contacts

Subject matter specialists

Xavier Zaegel
Partner – Capital Markets Services
Tel: +352 45145 2748
xzaegel@deloitte.lu

Patrick Laurent
Partner – Technology & Enterprise Application
Tel: +352 45145 4170
palaurent@deloitte.lu

Dr. Marc Sniukas
Director – Innovation
Tel: +352 45145 3548
msniukas@deloitte.lu

Thibault Chollet
Director – Technology & Enterprise Application
Tel: +352 45145 2656
tchollet@deloitte.lu


Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting Leader and Regulatory Watch Co-Leader
Tel : +352 45145 2702
siramos@deloitte.lu

Jean-Philippe Peters
Partner – Risk Advisory and Regulatory Watch Co-Leader
Tel : +352 45145 2276
jppeters@deloitte.lu

Benoit Sauvage
Director – Regulatory Watch Coordinator
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Manager – Strategy, Regulatory & Corporate Finance
Tel : +352 45145 2311
mvuksic@deloitte.lu

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