European crowdfunding platforms have welcomed the new EU rules that came into effect this month, requiring all firms to have authorisation from a European regulator.
The European Crowdfunding Service Provider Regulation (ECSPR) was introduced in November 2021 to harmonise peer-to-peer lending and crowdfunding across the bloc.
All firms had to attain a licence by 10 November 2023.
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“The new EU regulation is a significant advancement for the industry as it strengthens investor protection and contributes to a more transparent and reliable financing market,” says Ludwig Pettersson, chief executive of SaveLend Group, an alternative finance group headquartered in Sweden.
“We welcome this harmonization of regulations. It creates a level playing field for all actors within loan- and equity-based crowdfunding in the EU.”
The ECSPR requires a certain amount of due diligence to be done on any new loan originator and borrower, including an assessment of criminal records relating to commercial, insolvency, fraud and money laundering issues.
It also mandates a key investment information sheet (KIIS) to be provided for each individual project. Each KIIS must contain information relating to the underlying borrowing or capital raising, risk factors, investor’s rights, complaint’s handling, detailed information about the project owner and the project and the portfolio management of the loans.
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“We are ready, and we warmly welcome the regulation as it increases investor protection and prevents unscrupulous actors from establishing themselves,” said Sebastian Harung, chief executive and founder of Scandinavian crowdfunding platform Kameo.
Heidi Wik, chief executive of Tessin Nordic Holding, a property lending platform in the region, also heralded the new rules.
“This is good news for both the industry and our investors, paving the way for a safer investment process,” she said. “At Tessin, we have had permission from the Financial Supervisory Authority since this spring for our operations in accordance with the new regulation.”