The regulation sets uniform rules across the EU for the provision of investment-based and lending-based crowdfunding for business funding. It allows platforms to apply for an EU passport based on a single set of rules, making it easier to operate across the EU.
The new rules are synergistic to the enhanced rules from the UK following the post-implementation review in 2019. PS19/14 introduced various protections following the failure of P2P platforms.
WLCF have experience in developing, maintaining and supporting platforms for regulated firms in multiple jurisdictions. We have been studying the new rules. In addition to a lot of standard features, such as AML integration, client money management, data protection, user permission management, audit trails etc, we have noticed the need for some platform changes that we will need to implement with our first ECSP client:
- – Automatic generation of the Key Information Sheet – Currently a profile is displayed with all the required information, we have designed a pdf template format that aggregates this information into a downloadable pdf of no more than six pages, that can be saved by users. This also needs to be provided with secondary market transactions.
- – Evidencing that Portfolio Management meets with Investor mandates – Platforms may be required to evidence that they have kept appropriate records pertaining to the investor mandate. This includes a full audit trail of changes to the mandate. Platforms will need to evidence that the allocation of investor funds is undertaken in accordance with the mandated provided.
- – Contingency Fund Payout Management – platforms may exercise discretion, but there are various notices that need to be sent out. Platforms will also need to keep an appropriate log as to the circumstances behind each decision and justify fair treatment of customers.
- – Ability to Cancel Within 4 days – Needed to comply with the ‘reflection period’.
- – Compliance checks for each crowdfunding offer/project – This is an updated list of the compliance checks that need to be checked as the offer progresses through the workflow.
These changes are relatively easy to implement and will be undertaken free of charge to our first ECSP clients.
If you are looking for a compliance advisor to assist you with making an application, please reach out and we will be happy to make introductions. Alternatively, if you are an advisor researching tech solutions for your client, please contact us, we would love to hear from you and see how we may be able to help each other.
In summary, ESMA has done a good job of distilling the key elements needed for effective regulation. It will be interesting to see how regulators cooperate to supervise the sector.
If you need an experienced team to deliver a RegTech solution that is compliant with the various crowdfunding requirements, you’ve come to the right place. Let us help you to launch your platform.