On 8 November 2022, thirteen Delegated Regulations and Implementing Regulations of the EU Commission dated 13 July 2022 on crowdfunding (the “Delegated Regulations” and the “Implementing Regulations”) were published in the Official Journal of the European Union.
The Delegated Regulations and Implementing Regulations aim at supplementing Regulation (EU) 2020/1503 of 7 October 2020 on European Crowdfunding Service Providers and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937, which is directly applicable in all Member States since 10 November 2021.
First, the Delegated Regulations provide for clarifications regarding the relationships between the crowdfunding service providers (the “CSPs”) and their clients, on the following points:
- the internal rules put in place by CSPs to prevent, identify and manage conflict of interest, notably in relation to their shareholders, managers or employees or any person linked to them by control;
- the entry knowledge test for prospective non-sophisticated investors that the CSPs carry out to i.a. assess their ability to bear loss in crowdfunding projects, including assessment of appropriateness, calculation of the net worth and valuation date of total of liquid assets and annual financial commitments;
- the characteristics of the key investment information sheet including a template of such document (for more information, please read our previous eAlert in this respect);
- the methodology for CSPs to calculate actual and expected default rate of loans offered on a crowdfunding platform by risk categories;
- the elements of the method to assess credit risk, the information on each inpidual portfolio to be disclosed to investors, and the policies and procedures required in relation to contingency funds;
- the complaint handling procedures such as the standard format and language, the acknowledgment of receipt and the verification of admissibility of the complaint, the investigations of complaints, the decisions and more generally the communication with complainants.
Secondly, the Delegated Regulations and the Implementing Regulations provide for specifications regarding the relationships between CSPs and the competent authority and their internal governance, such as:
- the requirements and arrangements for the application for authorisation as CSP and a template of an application form to ensure a uniform and adequate assessment of the application process,
- the measures and procedures for CSPs’ business continuity plan, including the continuity of critical services and the sound administration of agreements,
- the standards and formats used by CSPs when reporting information to competent authorities including ESMA.
Finally, the Delegated Regulations and the Implementing Regulations provide for clarifications regarding the cooperation between the competent authorities concerning:
- the exchange of information between competent authorities in relation to investigation, supervision and enforcement activities;
- the standard forms, templates and procedures for the cooperation and exchange of information (i) between competent authorities and ESMA and (ii) between competent authorities; and
- the standard forms, templates and procedures for the notifications of national marketing requirements applicable to CSPs by competent authorities to ESMA.
The Delegated Regulations and the Implementing Regulations enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.