A provisional political agreement has been reached between the European Parliament and the European Council that will support crowdfunding services in the fintech industry.
As well as boosting cross-border business funding, the proposal aims to harness the potential growth opportunities for small companies or start-ups in the financial sector when utilising the crowdfunding option.
European Crowdfunding Service Providers (ECSPs) will now be able to list offerings of up to €5,000,000 within a 12 month period across the European Union; previously, a €1 million cap had been proposed.
Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People (a division of the European Commission) welcomed the agreement and described crowdfunding as an ‘important source of alternative financing’ for many European entrepreneurs.
He commented: “An EU crowdfunding licence would help crowdfunding platforms scale up in Europe.
“This will allow investors to match up with companies from all over the EU, bringing more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of investors.”
The agreement will see investors provided with more security and transparency through the inclusion of a new key investment information sheet (KIIS).
This will be drawn up by the project owner for each crowdfunding offer and provides investors with direct information about the financial risks and charges they may incur, including insolvency risks and project selection criteria.
Also, investors that are identified as ‘non-sophisticated’ can access more advice and guidance if needed on matters such as handling losses and warnings surrounding investments exceeding either €1000 or 5% of their net worth.
“I am satisfied that we came to an agreement on the final version. I hope that, in a couple of years, investors will see this agreement as a good 2019 Christmas gift,” added Eugen Jurzyca (ECR, SK), rapporteur for crowdfunding regulation.
European businesses will be able to more easily reach out to a significantly larger pool of potential investors, thus increasing their chances of succeeding.
A prospective project will have to request authorisation from the national competent authority (NCA) of which they are established to help strengthen security.
“This regulation will allow crowdfunding service providers to give SMEs, start-ups and innovative companies new opportunities. New projects will have better access to finance that will boost the real economy,” said Caroline Nagtegaal (Renew, NL), rapporteur responsible for file on “Markets in financial instruments: crowdfunding service providers”.