Crowdfunding Service Providers According to ECSPR
ECSPR Regulates Crowdfunding Service Providers in Europe
For projects with low-volume financing requirements of up to EUR 5 million, crowdfunding has established itself in recent years as an attractive form of financing. In the European Union, there are already numerous crowdfunding platforms through which project promoters can offer interested investors internet-based investment opportunities in the form of loans or securities. Within the EU, operators of such crowdfunding platforms require a license for their business activities in accordance with the ECSP Regulation (European Crowdfunding Service Provider Regulation). In Germany, BaFin is responsible for issuing an ECSP license. To obtain a BaFin license under the ECSP Regulation, crowdfunding service providers must prove to BaFin that they meet all the requirements for the granting of a license under the ECSP Regulation. The BaFin license procedure under the ECSP is quite complex and requires careful preparation, which should be accompanied by a specialized lawyer or a law firm qualified in the field of ECSP Regulation.
Requirements for an ECSP License as a Crowdfunding Service Provider
The ECSP license required for the operation of a crowdfunding platform will only be granted by BaFin if the crowdfunding service provider meets the regulatory requirements under the ECSP Regulation. In any case, crowdfunding service providers must have a regulatory minimum capital, which must be proven in the form of own funds or via an adequate insurance policy or guarantee. The regulatory capital must be at least equal to one-fourth of the operating expenses of the crowdfunding service provider established in the last fiscal year, but no less than 25,000 euros. In addition, according to the ECSP Regulation, the persons acting as directors of the crowdfunding service provider must possess sufficient professional qualifications and be reliable. The owners of significant shareholdings in the ECSP crowdfunding service provider must also prove their reliability. The company of the crowdfunding service provider itself must have a proper and professional business organization, which includes in particular internal control mechanisms in the area of money laundering prevention, risk management, IT security and the specific compliance to be observed by crowdfunding service providers according to the ECSP.
Passporting of Crowdfunding Service Providers with BaFin License According to ECSP Regulation
The ECSP regulation not only holds far-reaching regulatory obligations for crowdfunding service providers. It also offers them attractive opportunities for business development. In any case, the ECSP license is of course a mandatory prerequisite for starting business operations. Once granted by BaFin, however, an ECSP license can also be used for pan-European business. In this respect, the ECSP Regulation provides for an uncomplicated passporting for licensed crowdfunding service providers to other member states of the European Union. If a crowdfunding service provider licensed in one EU member state in accordance with the ECSP Regulation intends to open its crowdfunding platform to investors from other EU member states, all that is required is a notification to its national supervisory authority. The notification must include, among other things, the intended date of the start of business in the other member state, the identities of the persons responsible for the planned foreign business, and a list of any other business activities of the crowdfunding service provider not covered by the ECSP Regulation.
The competent lawyer for questions concerning the ECSP license and crowdfunding service providers in our law firm is Attorney Lutz Auffenberg, LL.M. (London).