MFSA Issues National Rules to Crowdfunding Service Providers Regulation


The MFSA has issued specific rules to add further guidance to the implementation of the EU Regulation 2020/1503 on European Crowdfunding Service Providers for business (the ECSP Regulation).

The main aim of the ECSP Regulation is to lay down uniform rules for the provision of investment-based and lending-based crowdfunding services related to business financing throughout the EU, while also ensuring the protection of investors.

The term “Crowdfunding Service Provider” refers to a legal person who provides the matching of business funding interests of investors and project owners through the use of a crowdfunding platform and which consists of any of the following activities:

  1. the facilitation of granting of loans;
  2. the placing without a firm commitment basis, of transferable securities and admitted instruments for crowdfunding purposes issued by project owners or a special purpose vehicle, and the reception and transmission of client orders, in relation to those transferable securities and admitted instruments for crowdfunding purposes.

Technical Standards

In order to comply with the requirements under the ECSP Regulation, Crowdfunding Service Providers are required to refer and comply with a number of Regulatory Technical Standards and Implementing Technical Standards.

Article 7(1) of the ECSP Regulation thus confirms that service providers are required to comply with the standards established in ‘EU Commission delegated regulation complimenting 2020/1503 of the European Parliament and of the Council with regard to regulatory technical standards specifying the requirements, standard formats and procedures for complaint handling’. They must also follow the standards on matters of conflict of interest established in ‘EU Commission Delegated Regulation supplementing Regulation (EU) 2020/1503 of the European Parliament and of the Council with regard to regulatory technical standards specifying conflicts of interest requirements for European crowdfunding service providers’.

The Business Continuity Plan must also follow the standards established in ‘EU Commission Delegated Regulation Supplementing Regulation (EU) 2020/1503 of the European Parliament and of the Council with regard to regulatory technical standards specifying the measures and procedures for crowdfunding service providers’ business continuity plan’.

Prospective investors are to be provided with a Key Investment Information Sheet (KIIS) and Crowdfunding Service Providers are required to report to the MFSA on an annual basis.

Marketing Communications

Chapter two of the MFSA rules details the national marketing requirements that will apply to crowdfunding marketing communication/information issued in or from Malta or which is circulated, published, broadcasted or otherwise received in Malta.

No person, other than a Crowdfunding Service Provider, may issue or cause to be issued, marketing communications, in or from Malta, unless its contents have been approved by the Crowdfunding Service Provider.

These rules do not however apply when the marketing communication only consists of:

  • Name of the Crowdfunding Service Provider
  • Its logo or other image associated with the provider
  • A contact point
  • A reference to the services provided.

The Crowdfunding Service Provider must make sure that all information in the marketing communication is:

  • Sufficient and presented in a manner which an average member of the target market can likely understand
  • Up to date
  • Consistently presented in the same language
  • Consistent with the KIIS (with indication that it is available).

With regards to the language used, the Crowdfunding Service Provider has the minimum responsibility of using the English/Maltese language when operating in Malta and using one or more official languages when operating in a specific Member State. The translation is deemed to be the service provider’s responsibility and must therefore ensure that it is a faithful translation from the original.

Furthermore, the marketing communications must specifically state that the Crowdfunding Service Provider is regulated by the MFSA or any other European regulatory authority, with the specific wording to be used provided in the rules. However, the communication may in no way suggest that the MFSA or any other applicable authority endorses or approves of the service provider.

The Crowdfunding Service Provider must also ensure that the design and presentation of the marketing communication is clear and fair by showing that any client can reasonably be expected to acknowledge it as a marketing communication. This information cannot conceal significant elements. It also cannot influence a person’s attitude to the offer by ambiguity, exaggeration, or omission. The type and nature of the offer must be clear, with important elements and warnings prominent and not obscured.

More specifically, information cannot be misleading in regard to:

  • The nature of the offer
  • The independence of the Crowdfunding Service Provider and their ability to provide the offer
  • The scale of its activities and the extent of its resources
  • The nature of the Crowdfunding Service Provider’s involvement in the offer
  • The scarcity of the offer
  • Past or possible future performance of the market offer
  • Mentioning other offers that have been successful without also informing clients of the failed offers
  • Any relevant risks (such as emphasis on potential benefits without detailing prominent risks)

In achieving this, the Crowdfunding Service Provider must avoid using complementary language which could insinuate that the offer is free of risks and avoid superlative/comparative expressions. This is done with the aim of not disproportionately encouraging investment in any one crowdfunding project.

Any assumptions or comparisons must be based on specified sources of up-to-date information in a relevant and fair manner. In relation to tax treatment, the details must be complete, accurate and fair with an indication as to whether the Crowdfunding Service Provider assumes responsibility for the withholding of taxes at source. Where reference is made to a particular tax treatment, it must prominently state that this depends on the client’s individual circumstances and that this may be subject to change in the future.

The Crowdfunding Service Provider must also ensure that warning statements are prominently situated with the same font size used for the rest of the information and they must appear alongside the benefits of the offer. This includes any reference to past performance; a warning must be attached stating that it is not a reliable indicator of future results. The same must be done for simulated performances, whereby the Crowdfunding Service Provider must state that the figures are only estimates and cannot be a reliable indicator. A warning is also required in regard to risks in the conversion of currency and the risks of partial/entire loss of invested money.

Through the publication of these rules, it is clear that the MFSA continues to strive towards investor protection and removing any deceiving or manipulative marketing strategies from abusing the crowdfunding market. This also helps ensure that the crowdfunding market is not shackled by such tactics that only serve to undermine the value this affords particularly to start-ups and SMEs.



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