Regulation 18592/2013 on equity crowdfunding is still under revision, despite the fact that Italy was the first to adopt a specific Regulation, making it a benchmark for all European Countries. As a matter of fact, last 3^rd December Consob opened a call for comments and propositions from stakeholders on an updated version of the Regulation, in the track of the Preliminary Consultation dating 19^th June 2015 (for full text of Consultation see:

http://www.consob.it/web/consob/home/-/asset_publisher/xMXdfdeSuZFj/content/consultazione-emittenti-30-novembre-2015/10194 ).

In its consultation paper, the Authority reports on the changes that might be made in the equity crowdfunding dispositions, based on its supervisory activities and on feedbacks received from operators, professionals, associations of stakeholders and from other players following the Preliminary Consultation.

 

The Draft of the –possibly- new Regulation conveys the will to simplify the process of crowdfunding, together with the aim of enhancing the growth of Italian market, which hasn’t proved to be very populated this far. It is also true that data show a highly increasing demand for crowdfunding, thus putting part of the blame on the burdensome dispositions in force: the new Massolution Crowdfunding Report[1] gives evidence of a global funded volume of 34,44 billion USD in 2015 (for all models and on aggregate basis), against 16,2 billion of 2014.

First of all, the new Regulation implements changes introduced by D. L. 24 gennaio 2015, n. 3 (converted into Legge 24 marzo 2015, n. 33) in articles 50-quinquies and 100-ter  of TUF[2].

Under current dispositions, only innovative startups are allowed on crowdfunding platforms, whereas new provisions refer to “offering subjects” (and not “issuers”), this way including in the definition also innovative SMEs, OICR (investment funds) and share companies investing mainly in innovative startups and SMEs. Such more inclusive approach adopted by Consob can be considered as a good sign, waiting for a complete opening to all Small and Medium Enterprises, heart of the Italian entrepreneurial scenario.

With the same aim of facilitating crowdfunding, investors certified to be professionals upon request to a financial intermediary would be introduced in addition to professional investors by law. As a consequence, a higher number of individuals would contribute to underwriting that minimum 5% required by the Regulation in order to complete the capital increase. Major issues encountered by operators in fulfilling this requisite did not convince Consob to lower the threshold, nor to include in the category of professional investors business angels too, though suggested by many, because of their uncertain juridical definition.

In essence, Consob confirms to believe that the evaluation carried out by an expert investor when making an investment, constitutes necessary guidance and protection for newcomers, and that such interest shall in any case prevail on the operational requirements of the platform Owners.

As far as execution of orders is concerned, a crucial point for the activity of Platforms and Intermediaries involved would be changed. As a matter of fact, obligations imposed by current Law are unanimously considered too demanding, because they do not allow to finalize the whole procedure online. Under current provisions, Owners operate under exemption from MiFID, according to a system of thresholds: for investments by natural persons below five hundred Euros for each transaction, or one thousand on an annual basis (respectively five thousand and ten thousand for legal entities), investors must answer a questionnaire on the Platform testing their minimum knowledge about illiquid and high-risk investments. On the contrary, for investments above threshold, the Intermediary executing orders is in charge of profiling investors in compliance with MiFID.

If new Regulation were confirmed, the Platform Owner could decide, in an opt-in logic, to make MiFID appropriateness test, for all operations and regardless of their amount; in this case the Owner will have to send Consob a communication describing all new processes it will implement at least 60 days before starting the said activities. If, on the contrary, the Owner will decide to keep operating under the current system, all checks will be carried out by the Intermediary in charge of executing orders, but the Owner will not longer have to prepare the above said questionnaire.

Summing up, here follows what may change in the new Regulation:

 

	Regulation currently in force	Regulation under Consultation
Entities allowed to equity crowdfunding	Only innovative startups	Innovative startups and SMEs, OICR  (investment funds) and companies investing mainly in innovative startups and SMEs
Investors underwriting 5% minimum of capital	Professional investors by law	Professional investors by law and professional investors upon request
Test of appropriateness	One regime: - orders below threshold: only questionnaire on Platform website prepared by the Owner   - orders above threshold: MiFID checks by Intermediary executing orders	Ordinary Regime: - orders below threshold: no checks - orders above threshold: MiFID checks by Intermediary   “Opt-in”Regime: Appropriateness test online by Platform Owner regardless their amount

 

Now it is up to stakeholders, who are asked to send Consob observations and contributions before 11^th January 2016.

Everyone wishes for a new, complete, clear Regulation, also hoping for a light impact of MiFID II and of its implementing dispositions that will come into force on January the 3^rd 2017. As a matter of fact, it is difficult to foresee how much the Authority will “absorb part of the changes via supervisory activity”, as stated in the Consultation Paper.

 

About equity crowdfunding, also see: http://www.blblex.it/blog.php?id=245&lang=en