On the 26th February 2021, the European Securities and Markets Authority (“ESMA”) has issued a Consultation Paper on the draft technical standards on crowdfunding under the European crowdfunding service providers Regulation (the “Regulation”).
The Regulation is the first of its kind in the sphere of the European Union enabling lending-based and equity-based crowdfunding services. The Regulation will be applicable to all crowdfunding service providers established in the EU and will provide the necessary protections for investors. ESMA has issued the Consultation Paper to develop the required technical standards by taking into consideration the responses of market participants.
The Consultation Paper issued by ESMA seeks input from market participants on the following matters:
- Complaints handling;
- Conflicts of interest;
- Business continuity plan;
- Application for authorisation;
- Information to client on default rate of projects;
- Entry knowledge test and simulation of the ability to bear loss;
- Key investment information sheet;
- Reporting by crowdfunding service providers to competent authorities; and
- Publication of national provisions concerning marketing requirements.
Further to this on the 25th February 2021, ESMA also published a Q&A clarifying the understanding of certain aspects relating to Special Purpose Vehicles (“SPVs”) under the Regulation.
The first set of Q&As have addressed the following topics:
- The circumstances and conditions on which SPVs may be created for the provision of crowdfunding services;
- The type of instruments that may be offered to investors through the SPV;
- The exposure limitations of SPVs; and
- The indicators to recognise illiquid or indivisible assets.
We would like to note that the Consultation Paper will be open for feedback until the 28th May 2021 while the majority of the above-mentioned technical standards will be submitted to the European Commission for adoption before the 10th November 2021. The remaining ESMA technical standards will thereafter be delivered by the 10th May 2022.
Feel free to contact us should you require further information on the establishment of crowdfunding services in the EU.