In Italy, anyone can invest in equity crowdfunding, both professional investors and so-called retail investors, i.e. small savers. In each online collection, however, professional investors must cover at least 5% of the total collection for it to be considered successful. These investors can be private or public clients and are called 'professional', or 'knowledgeable', in that they possess the experience, knowledge and skills necessary to make financial investment decisions based on an assessment of the risks assumed.
Consob's rules
The Consob Regulation on equity crowdfunding stipulates that for an offer through an equity crowdfunding portal to be valid, the portal operator must verify that at least 5 per cent of the financial instruments offered have been subscribed by one or more of the following
· professional investors
· banking foundations;
· incubators of innovative start-ups;
· investors supporting SMEs with a portfolio value of financial instruments, including cash deposits, in excess of €500,000, meeting the requirements of good repute set forth in Article 8, paragraph 1, and at least one of the following requirements
· having made, in the last two years, at least three investments in share capital or shareholder financing in SMEs, each of at least €15,000 (including those made through Concrete Investing);
· having held, for at least 12 months, the position of executive director in SMEs other than the bidder.
The 5 per cent threshold is reduced to 3 per cent for bids made by SMEs in possession of certification of their financial statements and consolidated financial statements, if any, for the last two financial years preceding the bid, drawn up by an auditor or a registered auditing firm.
Characteristics of professional investors
Professional investors include institutional investors, i.e. private companies or public bodies that make investments on a systematic and cumulative basis, and qualified investors, who are not institutional but have characteristics and/or professional skills that make them actors with special qualifications. High net worth individuals are usually included in this group and with whom faster and less binding procedures can be applied.
Professional investors, whether private or public, institutional or qualified, are distinguished between professional investors by right and 'on demand'. There is also a final category, outside the two distinctions made above, that of investors supporting SMEs.
1. Professional investors by right
This category includes all entities authorised or regulated to operate in both Italian and foreign financial markets, such as banks, investment firms, financial institutions, insurance companies, collective investment undertakings and management companies of such undertakings, pension funds and management companies of such funds, and dealers in commodities and commodity derivatives on own account.
These entities also include large companies that present themselves as a single company and have to fulfil at least two size criteria among them
· total balance sheet assets of at least EUR 20 million;
· a net turnover of at least EUR 40 million;
· own funds of EUR 2 million.
2. Professional on-demand investors
This category includes persons who make an express request to an intermediary to be treated as professional investors. The intermediary (e.g. the bank of which the investor is a client) conducts a certain investigation whereby it 'classifies' the client as a professional on demand.
To become a professional investor, two of the minimum requirements must be met:
· they must have carried out transactions of significant size on the market in question with an average frequency of 10 transactions per quarter over the previous four quarters;
· the value of their securities portfolio must exceed EUR 500,000, including cash deposits;
· the investor must have held a professional position in the financial sector for at least one year, which presupposes knowledge of the transactions or services envisaged. In this case, the portals merely verify the certification that the investor will have obtained from his intermediary.
3. Investors supporting SMEs
Investors supporting SMEs are individuals or legal entities that, in addition to having the value of their portfolio of financial instruments, including cash deposits, exceeding EUR 500,000, must meet at least one of the following requirements
· having made, in the last two years, at least three investments in share capital or shareholder financing in small and medium-sized enterprises, each of an amount of at least EUR 15,000;
· having held, for at least twelve months, the position of executive director in small and medium-sized enterprises other than the bidding company.
Finally, banking foundations and certified incubators of innovative start-ups are also considered professional investors under the equity crowdfunding rules.