On 27 May 2024, ESMA published new questions and answers regarding Regulation (EU) 2020/1503 on European crowdfunding service providers for business (the “Crowdfunding Regulation”).
With respect to prudential requirements for control functions (compliance, risk and audit) of crowdfunding service providers ("CSPs"):
- ESMA has clarified the seniority between the own funds and the insurance policy in case of losses for the CSP whose prudential safeguards are combination of own funds and insurance policy;
- ESMA has explained what should be done with a possible own risk excess of the insurance policy that CSPs subscribe to comply with the prudential safeguards established under Article 11 of the Crowdfunding Regulation
Still on the topic of control functions, ESMA confirms that all CSPs shall establish, in the context of their organisational arrangements, a risk management framework whose complexity is also determined by the various provisions which are applicable to the specific activities provided by the CSP taking into account the nature, scale and complexity of such activities. EMSA further confirms that when CSPs intermediate loans, such risk management framework shall at least assess the risks related to the loans intermediated on the crowdfunding platform.
A further new question on default rate disclosure to clients has been published; an answer from ESMA is not available at time of printing.
All new ESMA questions and answers are available by using the search tool at this link.
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