On Monday 19 March, the European Crowdfunding Network (ECN) welcomed the European Commission's recent proposed regulation on crowdfunding. It was presented ten days ago (see EUROPE 11977), which has given the organisation time to scrutinise the proposal and suggest certain targeted improvements.
Readers may recall that the proposal on the table provides for a European passport allowing crowdfunding platforms to apply to provide their services throughout Europe, upon prior authorisation of the European Securities and Markets Authority.
“The proposal is a positive and relevant sign of support for the sector, while ensuring good investor protection”, said its Director General, Oliver Gajda, adding that “with some minor changes (…), this proposal will be a game change for the crowdfunding sector in Europe”.
First of all, the organisation recommends that the regulation clearly recognise the difference between lending- and investment-based crowdfunding, in order to propose measures adapted to each of the two instruments.
Whereas the Commission describes the two instruments as “comparable business funding alternatives”, the ECN notes that a comparison of the characteristics, risk profiles and target segments of the two instruments reflects “profound differences” that make it difficult to regulate them both in an equivalent manner.
The ECN goes on to observe that the prohibition on managers, employees and major shareholders investing in crowdfunding offerings is unnecessary. “Demonstrating that management puts their own money (…) greatly reinforces the transparency and therefore the trust with investors, as all parties have an alignment of interest”, it explains. As long as no preferential treatment is granted, it considers that there is no risk of conflicts of interest.
Finally, the organisation also refers to the exclusion of crowdfunding campaigns of a total amount of more than €1 million over a period of 12 months and reiterates its concerns - on which we have previously reported (see EUROPE 11976) - that such a low threshold could be counter-productive.
Several more recommendations were also made concerning the marketing rules, the question of payment services and the 'key investment document'. (Original version in French by Marion Fontana)