We wrote on the Crowdfunding Regulation when it was first published in late 2020 and also when it began to apply in November 2021. The Crowdfunding Regulation covers investment-based crowdfunding and peer-to-peer/loan based crowdfunding. The new framework requires in-scope crowdfunding service providers (i.e. a legal person established within the European Union as defined in the Crowdfunding Regulation) (CSPs) to be authorised and also subject to operational and prudential requirements.
A further significant development occurred in January 2022 when the Central Bank of Ireland (CBI), the competent authority for crowdfunding regulation in Ireland appointed under the European Union (Crowdfunding) Regulations 2021, announced a new regulatory regime in connection with rules on advertising for CSPs in Ireland and a related addendum (effective from 13 January 2022) to the Consumer Protection Code.
A major motivation for the new CBI regime is to try and ensure enhanced protection for investors in addition to ensuring that they are informed as to potential risks. As such, various provisions of the Consumer Protection Code will now apply to advertising by CSPs in Ireland.
Amongst other things, any advertisement must be fair and clear and must not mislead or seek to influence consumers unduly in their investment decisions. CSPs must also display a prominent warning message on all advertisements that investment in crowdfunding projects entails risks, including the risk of partial or entire loss of the money invested, and that any investment is not covered by a deposit guarantee scheme or by an investor compensation scheme.
Transitional arrangements in place under the Crowdfunding Regulation allow existing CSPs (which provided crowdfunding services in Ireland before the introduction of the Crowdfunding Regulation) to continue to provide crowdfunding services until the earlier of: (i) 10 November 2022; or (ii) the date that they are authorised. Such transitional arrangements do not apply to CSPs who have not carried out crowdfunding services within Ireland prior to the commencement of the Crowdfunding Regulation and, as a result, such new applicants will be required to obtain authorisation in advance of engaging in such crowdfunding services. It is an offence for such CSPs to commence engaging in crowdfunding services until authorisation as a CSP has been obtained from the CBI.
Authorisation (which may be refused) by the CBI will involve the following steps:
- a preliminary meeting with the CBI will be held to discuss the proposed application;
- submission of an application form and questionnaire;
- acknowledgement of receipt by the CBI within ten working days of submission;
- assessment by the CBI of the application for completeness within twenty-five working days (the CBI will notify applicants of any required information and documents required in relation to incomplete applications and provide a deadline for the applicant to provide the missing information);
- CBI decision within three months of receipt of a complete application; and
- letter of authorisation issued by CBI to successful applicants outlining the authorisation requirements and any applicable conditions.
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