On the 25th January 2022, the Malta Financial Services Authority (the “MFSA”) issued new Crowdfunding Rules in terms of the Malta Financial Services Authority Act (European Crowdfunding Service Providers for Business) Regulations (Subsidiary Legislation 330.15). The Crowdfunding Rules implement the requirements of Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European Crowdfunding Service Providers for Business (the “ECSP Regulation”), which a ‘crowdfunding service provider’ (as defined in the ECSP Regulation) (“CfSP”) ought to comply with.
The ECSP Regulation aims to harmonise the legal framework for CfSPs operating digital platforms in the European Union (“EU”) which provide investment-based and lending-based crowdfunding services related to business financing for offers up to €5 million (calculated over a period of 12 months).
The Crowdfunding Rules are split into two chapters. Chapter 1 highlights the relevant technical standards issued / to be issued under the ECSP Regulation, whereas Chapter 2 sets out the marketing requirements that will apply to crowdfunding services, as further detailed below.
Chapter 1 – Technical standards under the ECSP Regulation
Chapter 1 refers to the applicable Regulatory Technical Standards and Implementing Technical Standards issued / to be issued under the ECSP Regulation, including those relative to:
- Complaints Handling;
- Conflicts of Interest requirements;
- Business Continuity Procedures;
- Authorisation of CfSPs;
- Entry Knowledge Test and the Simulation of the Ability to Bear Losses;
- Key Investment Information Sheet;
- Reporting;
- Information to Clients on Default Rates;
- Individual Portfolio Management of Loans offered by CfSPs;
- Disclosure of Information to Investors; and
- Credit Risk Assessment, Loan Pricing, and Risk Management.
Chapter 2 – Marketing requirements
As the competent authority responsible for carrying out the functions and duties provided for in the ECSP Regulation, and to issue rules for such purposes, the MFSA sets out, in Chapter 2 of the Crowdfunding Rules, the marketing requirements which will apply to any marketing communication or information issued in or from Malta; or that which is circulated, published, broadcasted or otherwise received in Malta.
Any information or communication from a CfSP to a prospective investor or prospective project owner about its crowdfunding services, other than investor disclosures required by the ECSP Regulation, is considered a ‘marketing communication’ in terms of the ECSP Regulation. This chapter outlines high-level principles, standards and relevant risk warnings applicable to such marketing communications.
The ECSP Regulation and the Crowdfunding Rules are applicable as from the 10th November 2021.
For more information on the ECSP Regulation and the Crowdfunding Rules, please contact us on capitalmkts@camilleripreziosi.com.
