Financial services providers & Crowdfunding Crowdfunding: Regulatory framework

Crowdfunding: Regulatory framework

Published on February 23, 2015

Crowdfunding in the form of securities subscription

The ordinance of 30 May 2014 provides the basis for a regulatory framework applicable to crowdfunding to ensure that it develops according to secure legal conditions and protects investors and borrowers.

The new legal and regulatory framework came into force on 1 October 2014.

The status of crowdfunding advisers (CIPs)

CIPs are notably subject to the following obligations:

  • the provision of investment advice, as their regular activity, on securities offerings defined by decree: this concerns “plain vanilla” capital and debt securities (ordinary shares and fixed rate bonds);
  • activities conducted by means of a progressive-access website, fulfilling the characteristics laid down by the AMF General Regulation;
  • obligation for platform managers to follow regulatory conditions of good repute and professional competence;
  • membership of an industry group regulated by the AMF (when one or more groups exist);
  • registration with ORIAS (a French association in charge of a single register of insurance, banking and finance intermediaries);
  • from now until 1 July 2016, the existence of a professional liability insurance policy;
  • observance of conduct of business rules relating to the management of conflicts of interest, the conducting of tests to ensure that the offering is suited to the investor's profile, the transparency of the services provided to the issuers and the fees charged for providing advice to clients;
  • compliance with the rules relating to the fight against money laundering and financing of terrorism;
  • CIPs are monitored by the regulated industry group to which they belong and by the AMF, or directly by the AMF;

Caution: CIP status may only be held concurrently with that of crowdfunding intermediary.

 Adapting the regime and scope of securities public offerings

Issuers conducting a securities offering through crowdfunding platforms (CIF or PSI) may be exempt from publishing a prospectus under certain conditions:

  • the total offering amount calculated over 12 months may not exceed, for the same issuer, one million euros;
  • the offering must be conducted through a progressive-access website;
  • the issuer and platform must provide investors with simple, clear and balanced information on the specific features of the project and the type of offering (such as the risks and related costs).

Simplified joint stock companies (SAS, France) may conduct securities offerings within the scope of the new exemption provided that they observe certain statutory requirements relating to voting rights, the distribution of governing body powers, quorum and majority requirements at ordinary and extraordinary meetings, and the rules for organising general meetings.

The absence of a non-guaranteed investment service

The AMF specifies, in its Position DOC-2014-10 jointly established with the ACPR, the conditions that the crowdfunding platform (CIP or PSI) must fulfil to presume that it does not provide a non-guaranteed underwriting service investment service. The position indicates that the platform must have a progressive-access website and refrain from actively seeking subscribers for a specific transaction.

Information published on crowdfunding platforms

AMF Instruction DOC-2014-012 states the information given by the issuer and supplemented by the PSI or CIP that must be communicated to investors before they subscribe or just after investors have expressly accepted the risks.

Reference texts 

  • Ordinance No. 2014-559 of 30 May 2014 on crowdfunding
  • Decree No. 2014-1053 of 16 September 2014 on crowdfunding
  • Order of 22 September 2014 approving amendments of the AMF General Regulation concerning crowdfunding
  • Order of 24 September 2014 on approving the articles of incorporation for ORIAS, the association in charge of the single register of insurance, banking and finance intermediaries
  • Order of 24 September 2014 amending the order of 20 December 2012 setting the annual registration fees for the single register of intermediaries mentioned in article L.546-1 of the Monetary and Financial Code
  • Order of 30 September 2014 on the professional competence of crowdfunding intermediaries
  • Order of 30 September 2014 amending the order of 1 March 2012 on the single register
  • AMF position (DOC-2014-10) and ACPR position (2014-P-08) on non-guaranteed investment and crowdfunding
  • AMF instruction on AMF processes for reviewing CIP registration applications, and the transmission of annual information (DOC-2014-11)
  • AMF instruction on investor information to be provided by the issuer and crowdfunding investment advisers or investment services providers within the framework of a crowdfunding offering (DOC-2014-12) 

Which status should the platform apply for?

A crowdfunding platform offering securities for subscription must come under the status of Crowdfunding Investment Advisor (CIP) or Investment Services Provider (PSI), with the investment advice as part of the requested investment services. Here is a presentation of these two statuses:

The status of crowdfunding investment adviser (CIP)

A crowdfunding platform offering securities for subscription may choose the national status of Crowdfunding Investment Advisor (CIP). It must then be registered with the ORIAS.
Please consult the AMF instruction (DOC-2014-11) explaining the AMF processes for reviewing CIP registration applications, and the submission of annual information.
The status of CIP is accessible without capital constraints but limits the type of transactions offered to plain vanilla securities and does not enable the platform to offer its services within the European Economic Area (EEA). Furthermore, CIPs cannot hold client funds or securities and can only combine their status with that of Crowdfunding Intermediary (IFP).
To become a CIP, the applicant must file a registration application with the AMF services. The form is available in the aforementioned instruction. The applicant must send a paper copy to the AMF. They are advised to send an electronic version to the team in charge of processing these applications:

List of authorised platforms. To check whether the platform has been registered as a CIP or IFP, please consult the ORIAS website, the body in charge of maintaining the single register of insurance, banking and finance intermediaries (see link at the bottom of this page).

The application may be followed by exchanges with the applicant to clarify certain points in the application. The AMF then notifies the ORIAS about the verification of the professional competences of the CIP's directors, as well as the compliance of the platform with the organisational and business conduct rules stated in the AMF General Regulation. The ORIAS then finalises the registration process of the platform. Once the CIP's registration has been finalised, the platform may become operational.

The status of investment services provider (PSI)

A platform may also opt for the status of PSI providing investment advice (among other services). In this case, they must be authorised by the ACPR following an analysis of their authorisation application by the AMF services. These platforms are jointly regulated by the AMF and ACPR.
The status of PSI providing investment advice only requires the platform to have a minimum capital of €50,000. If the platform receives funds from clients, it is required to observe prudential regulations. Additionally, the status of PSI grants the option to offer all categories of securities and to obtain a passport to provide investment services within the EEA.

List of rules to comply with

Platforms (CIP or PSI) must act in the best interests of investors at all times, from selecting offers through finalising the investment (see section on "Regulatory framework").
Furthermore, CIPs and PSIs are subject to the organisational and business conduct rules defined in Book III of the AMF General Regulation. 

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