In November of 2021, the European Union adopted new rules that allow securities crowdfunding platforms to raise capital across all member states. The move has been welcomed by the industry as it will remove national barriers enabling firms to raise up to €5 million across the EU. European Crowdfunding Service Provider Regulations (ECSPR) are not without certain struggles. A platform must be approved by the relevant authority (securities regulatory) in a member state first to allow pan-European investment crowdfunding to take place. Some member states have moved quicker than others to create specific rules for an ECSP to operate.
As was previously reported, Crowdcube was the first platform to be approved to operate in Spain – a country where the firm has long had a presence (Barcelona). Crowdcube was also the first platform to raise money under the new rules.
In the past few days, the European Securities and Markets Authority (ESMA) posted its first list of approved providers. The list notes whether or not a platform is able to raise debt capital or other securities and which member states it intends to provide services, as well as outlining additional services the platform may provide.
These include:
- Crowdcube : Spain – Crowdcube.es
- Placing without a firm commitment basis of transferable securities and admitted instruments for crowdfunding purposes and the reception and transmission of orders in relation to those transferable securities and admitted instruments;
- No loans
- All member states
- CrowdedHero: Latvia – crowdedhero.com
- Placing without a firm commitment basis of transferable securities and admitted instruments for crowdfunding purposes and the reception and transmission of orders in relation to those transferable securities and admitted instruments;
- No loans
- All member states
- LendaHand : Netherlands – Lendahand.com
- Facilitation of granting of loans, which includes the provision of relevant information such as default rates of loans
- Placing without a firm commitment basis of transferable securities and admitted instruments for crowdfunding purposes and the reception and transmission of orders in relation to those transferable securities and admitted instruments;
- Netherlands Only
- Villyz : France – villyz.fr
- Facilitation of granting of loans, which includes the provision of relevant information such as default rates of loans
- No transferable securities and admitted instruments
- France only
Additional services may include operating a bulletin board or enabling Special Purpose Vehicles and more.
Around the same time that ESMA posted the current list of approved ESCPs, the agency also posted an update to the list of questions and answers for active and aspiring ECSPs.
In brief, the new ESMA Q&As include:
- Crowdfunding Services and MiFID services
- Scope of exemption under Art. 1(2)
- Non-interned based platform
- Offer to a sole investor
- Entity offering of own projects
- Simulation of the ability to bear loss
- Entry knowledge test
- Conflicts of interest
If you are interested in digging into this further the document may be downloaded here.
It is interesting to note that several US platforms are working on entering the European market for online capital formation under ESCPR.
Republic purchased UK-based Seedrs and expectations are for Seedrs to set up operations in Ireland very soon.
SeedInvest invested in Crowdcube, securing a seat on the board, thus solidifying the relationship to provide cross-Atlantic securities offerings.
Wefunder has publicly stated its intent to launch in Europe before the end of 2022.
US platforms will benefit from the ability to list securities on both sides of the Atlantic as long as they comply with rules in the different jurisdictions.
Other US platforms may follow as well and, certainly, other European platforms will be added to the list of approved providers in the coming weeks.
The current list for ECSPs is available here.