United Kingdom (and EU regulation)

ESMA final report on the relevance of extending the transitional period set out in Article 48 of the EU Crowdfunding Regulation

On 19 May 2022, the European Securities and Markets Authority (ESMA) issued a final report regarding the relevance of extending the transitional period set out in Article 48 of the EU Crowdfunding Regulation (ECSPR).

The final report has been issued in response to a formal request that the ESMA received from the European Commission to provide, by 27 May 2022, technical advice on the aspects referred to in Article 48(3) of the ECSPR, namely the application of the ECSPR to crowdfunding service providers that provide crowdfunding services only on a national basis, on the impact of the ECSPR on the development of national crowdfunding markets and on access to finance and on the relevance of extending the transitional period.

In relation to the transitional period, Article 48(1) of the ECSPR provides that “Crowdfunding service providers may continue in accordance with the applicable national law to provide crowdfunding services that are included within the scope of this Regulation until 10 November 2022 or until they are granted an authorisation referred to in Article 12, whichever is sooner”. Most crowdfunding providers which operated prior to the entry into application of the ECSPR (i.e. 10 November 2021) are currently operating in accordance to national law under the transitional period set out in Article 48(1) of the ECSPR.

The final report contains the ESMA’s technical advice. It focuses on the:

Application of the ECSPR to crowdfunding service providers that provide crowdfunding services only on a national basis.
Impact of the ECSPR on the development of national crowdfunding markets and on access to finance.
Relevance of extending the transitional period.

Key findings in the final report include:

The ESMA expresses concerns with the potentially detrimental consequence an absence of extension of the transitional period could have on some national crowdfunding markets. At the same time, the ESMA mentions investor protection and convergence concerns that may arise from the extension of the transitional period.
To avoid that any extension unnecessarily delays the transition to the ECSPR, the ESMA suggests to the Commission that it might explore the possibility of applying this extension to crowdfunding service providers currently operating only on a national basis which have duly applied for authorisation prior to 1 October 2022.

The final report has been submitted to the Commission.