The Central Bank announced the details of its new regulatory framework for crowdfunding service providers (CSPs) on 13 January 2022, following the publication earlier that week of details of its authorisation process for CSPs.
The directly-effective EU Crowdfunding Regulation has applied from 10 November 2021 to providers of two key types of crowdfunding: investment-based crowdfunding, and peer-to-peer lending.
There is a transitional period:
In-scope CSPs that are already engaged in activities that require authorisation under the new framework can continue to engage in those activities on a transitional basis until 10 November 2022, following which they will only be able to engage in those activities if they have been authorised to do so by their national competent authority (in the case of Ireland, the Central Bank).
For new applicants for authorisation, the Central Bank has published a Guidance Note.
Some aspects of the new framework are still to be finalised:
The European Securities and Markets Authority (ESMA), and the European Banking Authority (EBA), were each tasked with preparing draft technical standards and submitting them to the European Commission.
All of the technical standards for which ESMA is responsible were submitted to the Commission on 10 November 2021.
Those for which the EBA is responsible have either been submitted to the Commission (where the deadline for doing so was 10 November 2021) or are the subject of a consultation (where the submission deadline is 10 May 2022).
We expect all of the technical standards to be finalised and published in the Official Journal well before the end of the transitional period.
Advertising requirements confirmed by the Central Bank:
In April 2021 the Central Bank consulted on the advertising and marketing requirements of its Consumer Protection Code that will apply to in-scope CSPs.
The Central Bank’s feedback statement on that consultation has confirmed (at Section 3) the existing requirements of the Consumer Protection Code that will apply to CSPs. As expected, these are provisions 9.2 – 9.6, 9.8 - 9.9, 9.13 - 9.14, 9.16 and 9.17 (see our briefing on that consultation for more detail on those provisions). As also expected, provisions 9.7, 9.10, 9.11, 9.18, 9.36, 9.39, 9.41 and 9.46 of the Consumer Protection Code will apply where an advertisement provides specific information (again, see our briefing on that consultation for more detail on those provisions).
In-scope CSPs will also need to include a regulatory disclosure statement in all advertisements (set out in a new provision 9.1a of the Consumer Protection Code contained in the recently published CSP-specific Addendum to the Consumer Protection Code). They must also ensure that advertisements to prospective investors carry the following risk warning:
WARNING: “Investment in crowdfunding projects entails risks, including the risk of partial or entire loss of the money invested. Your investment is not covered by a deposit guarantee scheme or by an investor compensation scheme.”
How we can assist
Our Financial Regulation Group has extensive experience of advising on authorisation perimeter issues and on authorisation applications to the Central Bank of Ireland for a wide range of regulated firms, and would be very happy to assist with queries in relation to the scope of the new regime and the authorisation process.