Saturday, 22 April 2017

EU Looks To CrowdInvesting To Plug Post-Brexit SME Capital Gap

The European Securities and Markets Authority (ESMA) has responded to an EU consultation on capital markets with a plea for the European Commission to focus on small businesses and investment-based crowdfunding; as well as more joined up regulatory supervision and more efficient collection of financial reporting data.

Recommendations include lighter information and reporting requirements for SMEs seeking to raise money; and EU regulation of crowd-investing to enable cross-border funding on a consistent basis.

ESMA says that only 10 of the 28 current EU member states reported the existence of regulated investment-based crowdfunding (in debt securities and equities/shares) in their territory - 99 platforms (up from 46 in 2014), of which 30 are based in the UK (up from 26 in 2014). France (23), Italy (17) and Germany (13) are fast followers. Only 12 platforms use a passport - based in either the UK or Finland (which has a total of 5 platforms). 

The various platforms are listed in the Appendix to the ESMA response. There is also a high level comparison of the various differences in terms of initial capital requirements; instruments and structures; remuneration models/levels and how these align with the interests of fundraisers/investors.

Volumes are not mentioned, but given that over half the platforms in 2014 were based in the UK, then it's likely they are still responsible for most of the volume. And the fact that ESMA bothers to push the sector at all suggests that those volumes are significant.

So this focus is not only an admission that Brexit creates a big and important capital-raising gap to fill, but it's also a big endorsement of the UK crowd-investment sector.  

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