On November 10, 2022, the two-year transitional period in the European Crowdfunding Regulation (Regulation (EU) 2020/1503 – “ECSP Regulation“) will expire. A authorization under national law (e.g. under the German Banking Act (KWG) or the German Trade Regulation Act (GewO)) will no longer be sufficient from this date. The new uniform European authorization under the ECSP Regulation will be mandatory. The same applies even if there is no cross-border reference.
- The ECSP Regulation serves to foster cross-border crowdfunding services and creates a uniform European framework for this purpose.
- Within its scope of application, it enables the activity of a swarm financing service provider in the entire internal market (so-called EU passport). It covers both credit-financed and investment-financed crowdfunding (crowd-lending and crowd-investing).
- The ECSP Regulation allows for the first time in Germany to grant loans directly (genuine crowd lending) without the previously required cooperation with a credit institution.
- The regulation contains detailed rules on investor protection. In particular, crowdfunding service providers must conduct an entry knowledge test of investors and a simulation of their ability to bear losses if they are not knowledgeable investors.
- Particular caution applies with regard to the so-called investment information sheet. According to the German Crowdfunding Service Accompanying Act (Schwarmfinanzierung Begleitgesetz), incorrect, misleading or missing information may give rise to a liability for damages of the project sponsor and the crowdfunding service provider as well as the responsible administrative and management bodies vis-à-vis investors. There are no plans for regulatory approval of the investment information sheet.
To date, the Federal Financial Supervisory Authority (BaFin), the competent authority in Germany, has not yet issued a European permit in accordance with the ECSP Regulation. We will report on further developments here.
