On 10 November 2021 the EU Regulation no. 2020/1503 - Regulation on European Crowdfunding Service Providers for Business or ECSP Regulation - entered into force. It introduces important changes for all players in the sector, but in particular for service providers and crowdfunding platforms such as 2meet2biz.com.
In the Italian context, this evolution contributes to the uniformity of the current regulatory framework, aligning equity/debt crowdfunding and lending crowdfunding, which are currently regulated differently. However, there is a transitional regime foreseen by the ECSP Regulation according to which crowdfunding platforms that are already operational at the date of entry into force will have one year to adapt to the new regulation, being able to continue to operate according to national rules until 10 November 2022.
The ECSP Regulation introduces a common framework valid for both equity crowdfunding and social lending crowdfunding. Keeping some similarities with the Consob Regulation on equity crowdfunding, it introduces several novelties for operators in the sector concerning, among other things, the authorisation system and prudential supervision rules, transparency, investor protection and management of conflicts of interest. The scope of the European regulation will be broader than the current Italian law, because it will apply to providers of equity crowdfunding, debt crowdfunding and lending crowdfunding services, with the exclusion of peer-to-peer lending to individuals, to which local regulations will continue to apply.
The European Union will be able to count on a single market for crowdfunding, as the licence obtained under the Regulation will allow each operator to carry out its activities in all EU countries, with the simple request of a passport of the licence from the Member State of authorisation to those where it intends to operate. Until now, the differences between existing national regulations were such that they hindered international crowdfunding. In particular, a fragmented European framework has created significant legal costs for the development of platforms and for entities wishing to apply for capital and funding, as they often face difficulties in determining which rules apply to crowdfunding services provided in another Member State.
Authorised crowdfunding providers will be entitled to a European passport that will allow them to operate in all Member States where they apply to do so. In the same way, companies will have access to the possibility of raising funds not only in Italy but throughout the European Union. The collection of venture capital will be extended to companies other than SMEs and crowdfunding platforms will be able to place minibonds with retail investors, while it will no longer be possible to place shares in OICRs (collective investment undertakings). The maximum fundraising limit for each company is set at €5 million over one year, compared to the current limit of €8 million under national law.
With reference to investments, all crowdfunding service providers will be called upon to define and implement adequate policies for the analysis, evaluation and selection of investment projects proposed on their respective platforms, so as to limit the level of exposure to risks and ensure fair treatment of potential investors and clients. The ECSP Regulation confirms, as already provided for in the national discipline, the introduction of "electronic notice boards" aimed at favouring the creation of a secondary market for crowdfunding instruments and therefore facilitating the exit from the investment.
Stricter rules on conflicts of interest are also introduced. Managers, for example, cannot join offers published on their own platforms and prudential requirements are introduced in terms of minimum capital and business continuity. These are important innovations for the industry that should help streamline and incentivise the provision of crowdfunding services across borders. Additional requirements are also foreseen in relation to the handling of complaints, whereby crowdfunding service providers must adopt effective and efficient procedures to protect users.
The aim of the new European regulation is to assimilate all the rules of the individual countries and to facilitate cross-border fundraising and investment activities between countries. Audits and documentation are now being equated everywhere and from 10 November 2021 crowdfunding platforms must adhere to the new rules in order to be accredited in Europe - just as is already being done in Italy since 2013 with the Consob Regulation. The opening up of the market will make it necessary for operators in each country to become more structured in order to seize the opportunities offered by the new scenario, including through international partnerships between platforms. The more the market grows, the more the operators are structured, and the greater the guarantees for investors. A win-win strategy for everyone.
We at 2meet2biz.com are ready for the challenges posed by the European market. In fact, the English version of our platform, dedicated to the international market, will soon be live.