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ECON Publishes Draft Report on Proposed Regulation on European Crowdfunding Service Providers

On August 10, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published its draft report on the European Commission’s March 2018 proposal for a regulation on European crowdfunding service providers (CSPs).

The draft report contains a draft European Parliament legislative resolution, the text of which sets out suggested amendments to the European Commission’s proposal. It also contains an explanatory statement in which the rapporteur, Ashley Fox, summarizes the changes he considers would improve it. In particular, Mr. Fox highlights the following:

  • The threshold proposed for crowdfunding offers should be raised from EUR1 million to EUR8 million. While the lower threshold tracks the threshold for the publication of a prospectus in accordance with other European requirements, certain Member States have higher thresholds. Having a low threshold for crowdfunding offers and a high threshold for a prospectus requirement would make crowdfunding a less attractive funding option.

  • The experience of national competent authorities (NCAs) on granting authorization and supervising the crowdfunding platforms should be recognized and their role in the European framework should be enhanced. Mr. Fox believes that there is no need for the pan-European regulator, the European Securities and Markets Authority (ESMA), to hold primary supervisory responsibility, which should remain with NCAs within a common supervisory framework.

  • As crowdfunding platforms vary in complexity, the proposed Regulation could differentiate between simple platforms, which facilitate the matching of investors and project owners, and more advanced platforms, which also determine the pricing and packaging of offers, by requiring different disclosure requirements for each. In doing so, there would be an opportunity to provide more proportionate regulation based on the varying activities and risks associated with each.

  • The regulation is an opportunity to provide regulation for initial coin offerings (ICOs) by imposing standards on ICO issuers and providing protections for consumers.

  • Third-country CSPs that wish to offer their services across the European Union should be able to, provided that they are authorized to do so in their own jurisdiction and measures are in place to guarantee that such CSPs adhere to the same rules as CSPs with a European passport.

The next step is for ECON to vote on the draft report before it is considered by the European Parliament in plenary.

The draft report is available here.

The European Commission’s original proposal is available here.

©2018 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
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John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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