The restriction of issuer liability proposed in the draft bill of the Future Financing Act could boost the issuance of securities using a crowdfunding platform in accordance with the European Crowdfunding Service Provider Regulation (ECSP). In its scope, the ECSP Regulation offers new possibilities when it comes to the content design of securities. For example, the regulation takes precedence over the national regulations regarding deposit-taking in the German Banking Act (KWG). This opens up the possibility for issuers to issue more attractive, non-subordinated financial instruments to investors. Especially in the case of security token offerings, this can lead to higher economical attractivity of the investment products offered. Investment products to be offered on crowdfunding platforms regulated by the ECSP Regulation may furthermore be marketed cross-border. The required sales documentation must then comply exclusively with the legal requirements of the ECSP Regulation. It can, in principle, be used for the public offering in all Member States of the European Union if the requirements of the ECSP for cross-border offerings are met.
Key Investment Information Sheet (KIIS) Instead of Securities Prospectus – No Approval by BaFin Required
Instead of a securities information sheet (WIB) or securities prospectus, the issuer must prepare a key investment information sheet (KIIS) when issuing securities under the ECSP Regulation. In terms of timing, this provides the advantage that the KIIS does not require approval by BaFin. The crowdfunding service provider operating the crowdfunding platform must provide investors with the KIIS prepared by the issuer. The ECSP Regulation therefore stipulates the obligation for the crowdfunding service provider to establish and apply adequate procedures to verify the completeness, accuracy and clarity of the information contained in the key investment information sheet. Should the crowdfunding service provider identify omissions, errors or inaccuracies in the key investment information sheet that may have a material impact on the expected return on investment, it must notify the issuer. It is then the issuer’s responsibility to revise and amend the KIIS accordingly. Should the issuer not comply with his obligation to adjust the KIIS, the crowdfunding service provider may cancel the offering.
Guidance on Precise Requirements Supports Issuers and Crowdfunding Service Providers
In order to enable issuers and crowdfunding service providers to fulfill their obligations with regard to the key investment information document, the European legislator provided detailed requirements for the structure and content of a key investment information document. This must be provided on a separate, permanent data carrier that is clearly distinguishable from marketing communications. In addition, it may not exceed six DIN A4 pages in printed form. In an accompanying ordinance, precise specifications were included as to how a key investment information sheet is to be structured. According to this, standard warnings must first be provided before an overview of the crowdfunding offer is given. This must be followed by information on the issuer and the main features of the crowdfunding process. This in turn must be followed by explanations on the conditions for the capital procurement. Subsequently, issuer-related and project-related risk factors must be included in the key investment information sheet. Here the European legislator again specifies which risk factors are to be taken into consideration. According to this, information relevant to investment decisions must be provided about the securities offered. The clear specifications help the parties involved to include all legally required information in the KIIS and thus make a valuable contribution to minimizing liability risks.
Attorney Dr. Konrad Uhink