New Regulation on EU Crowdfunding Services Announced

A new Regulation on EU crowdfunding services has been agreed following negotiations between the European Parliament and the Council.

European Conservatives and Reformists (ECR) Group’s Slovakian MEP Eugen Jurzyca led the negotiating team for the Parliament in order to further the EU’s aims of a ‘Capital Markets Union’.

The ECR rapporteur hopes that the new legislation will help to stimulate the internal market for cross-border crowdfunding for businesses, whilst providing adequate protections for private investors.

According to ECR Group, the legislation is expected to help individual investors to have a greater share in economic growth while improving access to finance for many small and micro enterprises.

The new law covers project offers worth up to EUR 5 million per owner per 12 months and will include both lending-based and investment-based crowdfunding, such as individual portfolio loans. Cryptocurrencies and Peer2Peer lending for non-business purposes are excluded.

It is agreed that the authorization will be granted and supervised by national authorities, as opposed to the greater role envisaged by the Commission for the European Securities and Markets Authority (ESMA), which will now be expected to mediate disputes between national authorities and provide technical expertise.

Several investor safeguards were added, such as alerts, investment limits for amounts exceeding either 1000 EUR or 5% of an investor´s net worth, and a 4-day reflection period for the investor.

In order to see how the new range of obligations works for crowdfunding platforms, including whether a genuine internal market is emerging, the Commission will review the implementation of the legislation in two years.

Speaking after the talks, Jurzyca said, “This new Regulation will help both small investors to have a access a greater share in our economic growth and will provide small companies with better access to finance.”

Following the political agreement, technical discussions will conclude the legislation before it can be formally endorsed by the European Parliament and Council in early 2020, with rules entering into force 12 months after that.