Interpretations of existing regulation concerning crowdfunding in Europe, North America and Israel

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The ECN Review of Crowdfunding Regulation 2013 considers the varying applications of the single market legislation to Crowdfunders across Europe both now and in the foreseeable future. Furthermore it takes a look at the Crowdfunding regulation in other relevant countries abroad.

Published by: European Crowdfunding Network, Belgium (2013)

The rise of crowdfunding over the past decade is a result of the on-going digitalisation of processes and communication in our society, with easy access to high-speed internet and digital devices. But crowdfunding has recently been moved to the forefront in the discussion on access to finance. This is a result of the economic crisis and the associated market failures of the incumbent financial services industry, which provides financing to small- and medium-sized enterprises (SMEs). Due to the benefits Crowdfunding provides for the financing of small and medium-sized enterprises, the European Commission has indicated an intention to support Crowdfunding. For example in its Green Paper on long-term financing of the European economy published on 25 March 2013 the European Commission raises the question how “non-traditional sources of finance, such as crowdfunding, can be supported”.

On 3 October 2013 the European Commission has started a public consultation asking for opinions on a (possible) harmonised regulation of Crowdfunding until 31 December 2013. According to the European Commission the aim of this public consultation is “to explore how EU action, including soft-law measures, could  promote Crowdfunding in Europe”. On the other hand, the Commission has traditionally displayed strongly consumer-protectionist tendencies and certain public pronouncements it has made indicate that any benefits it may be able to confer through the creation of a harmonised single market may well be outweighed by regulatory burden.

Crowdfunding is already restricted by national regulatory provisions, but the continuing development of the European single market in financial services has and will continue to ensure that there is a small degree of conformity between those national regimes, even absent any Crowdfunding-specific European regulation. Further it can be anticipated that Crowdfunding could be even more restricted under the future AIFMD regime.

The European Crowdfunding Network is extremely grateful to every single contributor to this paper, who has given her or his expertise free of charge and in a very short time frame. There are too many people involved to mention them all here, but the reader can find their contact details at the end of each contribution. When we presented the idea to Tanja Aschenbeck-Florange of Osborne Clarke, Germany, she immediately understood the value and committed her time and that of her team. This paper would not have happened without her. Together with her colleague Thomas Nagel, she is responsible for the majority of the legal editing. We also thank Reid Feldman of Kramer Levin, France, who came forward on his own accord and supported the editing work. There are many other people that have helped in other ways and we are grateful for their support, too.

We trust that this paper will be a key tool for regulators across Europe and beyond, for entrepreneurs, investors and any other interested stakeholder. Let us shape the future of crowdfunding together.