[ESMA35-42-1088] Q&A on the European crowdfunding service providers for business Regulation

ESMA has published an updated version of its Q&A on the ECSPR (Regulation (EU) 2020/1503). In this latest version, several new Q&As were added relating to the use of SPVs as set out in Section 1 and authorization issues as set out in Section 6 of the document.
We would like to present the new entries in full, quote:
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#### Use of SPVs
Question 1.6: When should an entity be considered as an SPV within the meaning of point (q) of Article 2(1)of the ECSPR?
Answer 1.6: Point (q) of Article 2(1) of the ECSPR defines SPV as “an entity created solely for, or which solely serves the purpose of, a securitisation within the meaning of point (2) of Article 1 of Regulation (EU) No 1075/2013 of the European Central Bank”.
Point (2) of Article 1 of Regulation (EU) No 1075/2013 of the European Central Bank defines securitisation as:
“a transaction or scheme whereby an entity that is separate from the originator or insurance or reinsurance undertaking and is created for or serves the purpose of the transaction or scheme issues financing instruments to investors, and one or more of the following takes place:
(a) an asset or pool of assets, or part thereof, is transferred to an entity that is separate from the originator and is created for or serves the purpose of the transaction or scheme, either by the transfer of legal title or beneficial interest of those assets from the originator or through sub-participation; (…)”
On this basis, and keeping in mind the content of recital (22) of the ECSPR, when an entity (i) created for the purpose or used for the purpose of the transaction (i.e. financing of the project) and (ii) separated from the project owner, is (iii) interposed between the crowdfunding project and investors and (iv) this entity receives, directly or indirectly, from the project owner a transfer of legal title or beneficial interest over the crowdfunding project, this entity should be regarded as a SPV within the meaning of point (q) of Article 2(1).
Should the competent authority reach this conclusion, on the basis of the information provided by the CSP, the SPV set-up would need to comply with the requirements of the ECSPR, notably Article 3(6).
Question 1.7: Can a CSP hold a participation in a SPV?
Answer 1.7: Article 8(1) provides that CSPs shall not have any participation in any crowdfunding offer on their platform. This requirement derives from the rationale included in recital (26) of the ESCPR whereby CSPs should operate as neutral intermediaries between clients on their crowdfunding platforms (i.e. projects owners and investors).
This means that the holding by a CSP of a participation in a SPV or any other entity interposed between the crowdfunding project and investors is not possible under the ECSPR unless it is demonstrated by the CSP to the national competent authority that such participation does not equal a participation in the underlying crowdfunding offer and, as such, does not impair its neutrality vis-à-vis its clients.
A national competent authority may consider that a participation taken or held by the CSP does not equal a participation in the underlying crowdfunding offer and that the neutrality of the CSP is not impaired when it receives evidence that the taking or holding of a participation in a SPV does not create, for the CSP, a distinct economic incentive (i.e. an incentive other than the one linked to the receipt of service fees charged by the CSP) to the success of the crowdfunding offer or the performance of the underlying crowdfunding project and that, consequently, such participation does not have the potential to trigger a conflicts of interests for the CSP.
In practice, the nature of the participation of the CSP in a SPV and its potential impact on the neutrality of the CSP shall be assessed on a case-by-case basis by the competent authority. The following indicative characteristics may, among others, be considered when performing this assessment:
– nature and characteristic of the CSP’s participation: (Is the participation by the CSP made in equity or through debt instruments? For an equity investment, what is the nature of the voting rights awarded to the CSP in the SPV? What is the nature of the economic rights awarded to the CSP in relation to its participation in the SPV? How correlated are these economic rights to the success of the crowdfunding offer and of the performance of the crowdfunding project?)
– size/relative value of the CSP’s participation. What is the value of the CSP’s participation? What is its relative value compared to the overall participation reserved for investors.
– Permanent or temporary nature of the participation (How long the participation is supposed to be held by the CSP? Is it supposed to be kept once the crowdfunding offer is completed?)
In agreement with its competent authority, a CSP may replicate, in the context of one or several other crowdfunding offers, a SPV set-up on which the competent authority has opined, without needing to seek the view of the competent authority every time.
#### Authorisation and supervision of CSPs
Question 6.3: When applying for the authorisation as a CSP, what are the proofs of own funds that existing undertakings can provide to the relevant authorising authority for the purpose of point (i) of Article 12(2) of the ECSPR and Field 10 of the Annex to the Delegated Regulation 2022/2112?
Answer 6.3: Article 12(2)(i) of ECSOPR (sic) establishes that the application for the authorisation as a CSP shall contain, inter alia, the proof that the prospective CSP meets the prudential safeguards in accordance with Article 11 of the same regulation.
Field 10, point 1, letter (a) of the Annex to the Delegated Regulation 2022/2122 complementing the ECSPR with regard to the authorisation requirements, requires applicants to provide the relevant authorising authority with the documentation of how the applicant calculated the amount of the prudential safeguards in accordance with Article 11 of the ECSPR. In addition, Field 10, point 1 establishes the proof of own funds that existing undertakings or newly incorporated entities shall provide to the authorising authority (respectively in letter (b) and (c)).
In accordance with Field 10, point 1, letter (b) of the Annex to the Delegated Regulation 2022/2122, existing undertakings shall provide the authorising authority with “an audited account statement or public register certifying the amount of own funds of the applicant”.
ESMA is of the view that, for the purpose of the authorisation as CSP of an existing entity, when a public register is not available and when full annual financial statements of the existing entity are not audited, the relevant authorising authority may accept a certification made by an independent auditor, of the existence and full availability of the own funds based on the accounts provided by the applicant.
For the purpose of Field 10, point 1 of the Annex to the Delegated Regulation 2022/2122, ESMA is also of the view that undertakings which have been incorporated after 10 November 2021 but have not yet been authorised by the relevant authorising authority and therefore have not provided any activity should not be considered existing undertakings.