The agreed text states that a uniform set of criteria will apply to all European Crowdfunding Service Providers (ECSP) up to offers of EUR 5,000,000 calculated over a period of 12 months per project owner.
To enable small companies or start-ups to use the crowdfunding option, the shares of certain private limited liability companies, which are freely transferable on the capital markets, are included in the scope of the legislation.
The legislation will be accompanied with additional safeguards and clarification on how investors should be informed of the consequences of their choices.
Investors would be provided with a key investment information sheet (KIIS) drawn up by the project owner for each crowdfunding offer, or at platform level. Crowdfunding service providers would need to give clients clear information about the financial risks and charges they may incur, including insolvency risks and project selection criteria.
In addition, investors identified as non-sophisticated would be offered more in-depth advice and guidance, including on their ability to bear losses and a warning in case their investment exceeds either EUR 1000 or 5% of their net worth, followed by a reflection period of four calendar days.
A prospective ECSP would need to request authorisation from the national competent authority (NCA) of the Member State in which they are established. Through a notification procedure in a member state, ECSP would also be able to provide their services cross-border. Supervision would also be carried out by NCAs with the European Securities and Markets Authority (ESMA) facilitating and coordinating cooperation between Member States. ESMA’s role, and to a lesser extent that of the EBA, would be strengthened in areas such as binding dispute mediation, data collection from NCAs in order to produce aggregated statistics and development of technical standards.
Technical work on the text is now under way by the services of the three institutions. The agreement will then have to be approved by the Economic Affairs Committee and the Parliament as a whole. To read the European Parliament’s press release in full, click here.