ESMA has written to the European Commission, suggesting a short delay to the application date for the EU Crowdfunding Regulation beyond 10 November 2021 (the current application date). 10 November 2021 is also the deadline for the submission, by ESMA, of most of its final draft technical standards under the Regulation to the Commission for endorsement. These parallel dates mean that those technical standards will not apply until some time after the Regulation begins to apply, and ESMA is concerned that this timing mismatch will make the authorisation process more difficult for national competent authorities (NCAs) and crowdfunding service providers (CSPs), and result in harmonisation issues and an uneven playing field for an interim period.
Separately, ESMA has also asked the Commission to clarify some key interpretation issues that have arisen for ESMA, NCAs and market participants. These include points relating to:
- the operation of the grandfathering period for existing CSPs
- the meaning of “business activity or activities” (in particular from a public sector and not-for-profit perspective)
- the legal status of the activity of “individual portfolio management of loans” (i.e. is it a crowdfunding service and is it seen as ancillary to the main activity of facilitating the granting of loans?)
- whether the prohibition on preventing (prospective) non-sophisticated investors from investing applies only to the outcome of the simulation of their ability to bear loss and not when they have not proven that they understand the investment and risks
- the scope of the restriction on remuneration for “routing investors’ orders”
- where responsibility sits (as between CSPs and project owners) when it comes to the preparation, publication and verification of the key investment information sheet.
In looking for clarification, ESMA has not expressly requested changes to the Regulation itself, and it may be that interpretative guidance from the Commission will suffice. A response from the Commission is awaited. In the meantime, for further information on the Regulation and its impact on Ireland, read the recent briefings from our Direct Lending team: