EU P2P lenders to introduce appropriateness tests and investing limits

European peer-to-peer lenders are to be ordered to create appropriateness assessments for non-sophisticated investors as the prospect of harmonised regulation across the continent moves closer.

The European Capital Markets Union (ECMU), part of the European Council, has compiled a crowdfunding directive that now needs to be ratified by the European Parliament.

The new rules state that all crowdfunding platforms in the EU must be authorised by their member state and can then passport into other jurisdictions within the political bloc.

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There will be a €5m (£4.5m) limit on how much can be raised through platforms on each project over 12 months and firms will need to comply with anti-money laundering regulations and be transparent about returns and interested parties.

Similar to the UK regulations, the rules say a limit should be set on how much non-sophisticated investors can invest and they will have to complete an appropriateness test to check they understand the risks.

The rules go slightly further than the UK and will give non-sophisticated investors a “reflection period” during which they can change their minds about an investment and get their money back.

“The new framework is part of the capital markets union’s project which aims at providing an easier access to new financing sources,” the ECMU said.

“It will remove barriers for crowdfunding platforms to provide their services cross-border by harmonising the minimum requirements when operating in their home market and other EU countries.

“It will also increase legal certainty through common investor protection rules.”

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