The New Crowdfunding Rules

The new Rules refer to the provisions of the EU Regulation 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business and amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937, (‘ECSP Regulation’). The major goal of the ECSP Regulation is to establish standard rules for the provision of investment-based and lending-based crowdfunding services connected to business finance within the European Union, as well as to ensure investor protection.

Hence, these new Rules must be read in connection with both the ECSP Regulation, which is directly applicable as of November 10th, 2021, and the Implementing and Regulatory Technical Standards issued or to be issued under the ECSP Regulation, which complement the ECSP with further detail. In this respect, the first chapter of these Rules highlights the relevant technical standards that the Crowdfunding Service Provider must refer to and comply with when providing its service. These include:

• Regulatory Technical Standards relating to Complaints Handling;
• Regulatory Technical Standards relating to Conflicts of Interest requirements;
• Regulatory Technical Standards relating to the Business Continuity Plan of Crowdfunding Service Providers;
• Regulatory Technical Standards relating to the Authorisation of Crowdfunding Service Providers;
• Regulatory Technical Standards relating to the Entry Knowledge Test and the Simulation of the ability to Bear Losses;
• Regulatory Technical Standards relating to the Key Investment Information Sheet;
• Implementing Technical Standards relating to Reporting by Crowdfunding Service Providers;
• Regulatory Technical Standards relating to Information to clients on Default Rates;
• Regulatory Technical Standards on Individual Portfolio Management of Loans offered by Crowdfunding Service Providers; and
• Regulatory Technical Standards on disclosure of information to investors and requirements on credit risk assessment, loan pricing and risk management.

Additionally, the ECSP Regulation allows competent authorities of Member States or EEA States to publish national marketing regulations that will apply to crowdfunding marketing communications in that Member State or EEA State. In this respect, the second chapter of these rules sets out the marketing rules that will apply to crowdfunding services provided by Crowdfunding Services Providers and European Crowdfunding Service Providers to clients in Malta. This chapter outlines the following:

• the applicability of the marketing rules;
• the general requirements;
• information that is to be included in Marketing Communications; and
• information about warning statements;