French Crowdfunding Association Worries Local Bond Offerings are Doomed Due to Excessive Regulatory Constraints

The French crowdfunding association, Financement Participatif France (FPF), has issued a statement regarding the potential for securities crowdfunding providers to enable local bond offerings. According to the FPF, the ability of platforms to provide a market for community bonds is “doomed to failure” following the publication of a government decree which was just recently released.

The FPF notes that the decree defining the eligibility criteria for local authorities and the procedures for implementing the issuance of bond securities by
local authorities via funding platforms have defined eligibility to point that it will block the potential market.

In November 2021, the European Union effectively approved pan-European securities offerings via an online platform. Member state regulators are expected to update their rules to reflect the EU legislation known as European Crowdfunding Service Provider Regulation (ECSPR).

FPF states:

Law n°2021-1308 of October 8, 2021, and European regulation 2020/1503 should have marked an opening significant for the financing of public authorities by allowing financing platforms to facilitate the granting of bond loans to them thanks to an experimentation law. However, the decree published on January 23, 2023 – one year behind the timetable voted by parliament – marks the launch of an experiment doomed to failure by the constraints it imposes on local authorities, which goes against the spirit of the European regulatory framework, and which contravenes the will of the elected officials and their representative associations to access a new source of funding. [translated]

FPF adds that EU Regulation represents a real opportunity for public authorities to finance themselves, often at a lower cost and at a fixed rate. At the same time, crowdfunding has the advantage of involving citizens in projects in their territory.

The order of January 23, 2023, is the result of a law passed when the scope of the European regulation (ECSPR) was uncertain. Since the passage of ECSPR the European Commission has clarified the scope of the Regulation, which covers projects carried out by local authorities. Thus, the European framework should
allow them to issue bonds via a platform that has obtained European approval to issue securities across all member states.

FPF explains that the French regulator proposal requires eligibility and implementation conditions that go against the European framework.

FPF says it is surprised by the message sent by the French regulator, which ignores the recommendations put forward by their association during the public consultation on the draft decree as well as the recommendations of other interested parties.

FPF calls the proposal counter-productive, and they are ready to work with the regulator to improve the regulatory framework.

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