- "The European internal market exploded: more than E5.4 billion was collected through alternative finance in 2015, according to a University of Cambridge report, with about E7 billion forecasted by the end of 2016.;
- Regulations were introduced in most Member States without any coordination, so that at the moment there are at least four different general legal frameworks, some within the MIFID system and some outside;
- This disparate approach creates challenging interpretation troubles. For example, concerning the EU passporting system: Lasse Makela, CEO of Invesdor (the first equity crowdfunding platform to get a full MIFID license) expressed his concern that their EU passport for the 28 Member States is somewhat useless, as crowdfunding is regulated outside MIFID;
- The lack of uniform regulations makes it very difficult to collect cross-border investment and to drive scale, which is vital for this kind of industry.
- No EU-wide passporting is allowed for lending platforms, as only payment services are regulated at European level. Just one single step in the equation.
"It is now quite complicated and even dangerous to change things. Creating new rules, when platforms and service providers have invested millions, have set up businesses and are finally generating traction. Unfortunately, the Commission missed a significant opportunity to design a uniform and effective market from which each Member State would have benefited...
Mr Perro goes on to argue that "despite this clear political mandate [to introduce pan-European regulation], and against the Commission's own repeated statements, we are at this point:
- The Commission's Legislative Proposal for the Prospectus Regulation reduces the exemption for prospectus obligation from E5 million to E500,000, putting real estate, energy, life-sciences, SME growth and expansion funding off the market.
- A Commission Staff Working Document dated May 3rd 2016 stated that:
- The nature of crowdfunding is predominantly local (probably some "expert" confused crowd-investing with donations and rewards-based crowdfunding, and forgot that it's the Commission's responsibility to have allowed cross-border investing);
- The market is still relatively small (regardless it is going far beyond the more optimistic forecasts of the World Bank).
- Therefore there is no strong case for EU level policy intervention.
Mr Perro concludes: "This is sad and disappointing. Without any logical explanation, the EU policy makers have wasted the perfect opportunity to regulate an industry from zero, avoiding harmonization troubles and boosting what the same Commission had identified as a strategic segment of the capital markets."