An important step for crowdinvesting and peer to peer finance has been accomplished last week in Europe. As advocated for by Crowd Valley, the European Securities and Markets Authority (ESMA) with input from the European Banking Authority (EBA) published two documents on investment-based peer to peer finance, called an "Opinion" and an "Advice", thus taking for the first time, a clear and public position on this new finance market.
In particular, the Opinion focuses on how the existing EU rules (e.g. the Markets in Financial Instruments Directive (MiFID), the Prospectus Directive, the Directive for Alternative Investment Fund Managers (AIFMD) and other financial and banking regulations) may apply to crowd investing platforms, depending on their business model, and provide guidelines to national authorities on how they could regulate platforms operating outside the scope of the harmonized EU rules.
The Advice, in turn directly addresses EU institutions, pointing out gaps and issues in the current applicable frameworks where policy-makers could consider taking action to ensure there are frameworks protecting investors while also fit for purpose for peer to peer platforms. More specifically, ESMA believes that a EU-wide common regulatory approach would benefit both investors and platforms, reducing the risks for investors on the one hand and facilitating platforms to grow their business, potentially reaching a pan-European dimension, on the other hand.
ESMA’s position on crowd investing has been favorably welcomed by many market participants. Crowd Valley’s CEO, Markus Lampinen, commented: “the European market presents a tremendous opportunity for capital markets to function cross border and create a dynamic solution to fueling innovation at various stages of the capital ladder. We welcome ESMA's steps and will continue to work with relevant stakeholders in seeing a productive and ultimately successful pan-European framework emerge."
This publication constitutes the first output of a co-ordinated program of work with the next expected output being a publication by EBA on lending-based crowd investing. The work of ESMA and EBA represents an important milestone for the European securities crowd investing market and hopefully the EU Institutions will take the advice of the European Securities and Markets Authority into account and translate it into tangible action. Mr. Lampinen concludes saying: “after several years of practical successes and learnings in the market, we are optimistic in seeing relevant authorities listening to the market and its needs. Crowd Valley remains dedicated to a global market, that functions efficiently with the right safeguards in place. That includes frameworks that guide capital formation, particularly in fragmented markets with regulatory complexities, like Europe”.
Image credit to: European Parliament http://bit.ly/1w93dJZ
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.