Crowdfunding service providers are invited to timely apply to the FCMC for authorisation
The provision of crowdfunding services is subject to authorisation of competent authority, in Latvia it will be the FCMC.
The FCMC calls on potential crowdfunding service providers without delay to make themselves known to the FCMC presenting the planned activities.
The single crowdfunding service framework is covered by the Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business (Regulation). The Regulation has been applied from 10 November 2021, specifying the requirements for obtaining authorisation. In Latvia, the draft law on crowdfunding services has been developed, determining the competent authority for the application of the Regulation in Latvia, its right to request supervisory information and other national supervisory matters. The above law remains to be adopted by the Parliament of the Republic of Latvia. The crowdfunding service provider operates a digital platform, bringing together investors and companies in need of financing. The financing could take a form of a loan or an investment in the capital of the company.
The crowdfunding service is an alternative way of raising funds for start-ups and small and medium-sized companies.
In the crowdfunding service, three types of participants are involved:
- project owner – a person who wishes to raise funds for the business and proposes the project to be financed,
- investors – persons (both natural and legal) who finance the proposed project,
- crowdfunding service provider – a company that operates an online platform that brings together the project owners and investors without a commitment basis.
According to the Regulation, the provision of crowdfunding services must be authorised. In Latvia, authorisation will be granted and this segment of the financial market will be supervised by the FCMC. Detailed requirements for the authorisation and operation of a crowdfunding service provider shall be laid down by the Regulation and by the Regulatory and Implementing Technical Standards issued by the European Securities and Markets Authority and the European Banking Authority. Above Regulatory and Implementing Technical Standards have yet to be approved by the European Commission. Draft standards are currently available, and the FCMC encourages to use them to familiarise themselves with the requirements of this area, as well as to take into account when preparing the documents required to obtain authorisation.
The FCMC calls on potential crowdfunding service providers without delay to make themselves known to the FCMC and present the planned activities, as well as to get advice on the requirements for obtaining authorisation of crowdfunding activities. By the date of entry into force of the draft law on crowdfunding services, the FCMC will assess the readiness of applications of potential crowdfunding service providers for obtaining authorisation. Applications could be approved after the entry into force of the Crowdfunding Service Law and full compliance of documents submitted by applicants with the requirements of the Regulation.
For companies planning to obtain authorisation to provide crowdfunding services, the FCMC invites to consult the licensing guidance and requirements for service provider qualification available on its website.
For investors, it is important to know that the Regulation obliges crowdfunding service providers to comply with requirements aimed at ensuring information transparency and assessing investors’ understanding of the risks they take when investing in the crowdfunding project.