Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/65/EU on markets in financial instruments
Date: 2018-03-08
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: approximation of laws, crowdfunding, financial legislation, financial services, innovation, investment, investment company, provision of services, small and medium-sized enterprises, start-up

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   EUROPEAN COMMISSION  Brussels, 8.3.2018 COM(2018) 99 final 2018/0047 (COD)  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2014/65/EU on markets in financial instruments (Text with EEA relevance) {SWD(2018) 56} - {SWD(2018) 57}  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

The  Commission  has  today  adopted  a  package  of  measures  to  deepen  the  Capital  Markets 
Union, together with the Communication "Completing Capital Markets Union by 2019 – time 
to  accelerate  delivery".  The  package  includes  this  proposal,  as  well  as  a  proposal  for  an 
enabling  EU  framework  on  covered  bonds,  a  proposal  to  facilitate  the  cross-border 
distribution of investment funds, a proposal on the law applicable to the third-party effects of 
assignments of claims and a Communication on the applicable law to the proprietary effects 
of transactions in securities.  

This initiative is related to part of the Commission's priority of establishing a Capital Market 
Union (CMU), which aims to broaden access to finance for innovative companies, start-ups 
and other unlisted firms.  

Today, access to finance remains difficult for these firms, particularly when they move from a 
start-up into the expansion phase, due to structural information asymmetries. Over-reliance on 
short-term unsecured bank lending is often overly expensive for start-ups and more generally 
for small and medium enterprises (SMEs). In addition, bank lending volumes to both start-ups 
and SMEs have been severely affected by the 2008 financial crisis, making the lack of funds 
an important reason as to why start-ups failed. 

In  the  light  of  these  market  failures,  crowdfunding  has  evolved  into  an  established  form  of 
crowdsourcing  and  of  alternative  finance.  The  crowdfunding  model  normally  involves  the 
project  owners  that  propose  the  project  to  be  funded,  investors  that  support  the  proposed 
project through funding and a moderating platform that brings the parties together to finance 
and launch the project in question. Crowdfunding platforms are increasingly used as a tool to 
finance various activities for small and nascent firms. 

tailor 

their  regulatory  frameworks 

As  a  response,  some  Member  States  have  already  introduced  domestic  bespoke  regimes  on 
the 
crowdfunding.  However,  Member  States 
characteristics and needs of local markets and investors, which results in differences of how 
the  rules  are  designed  and  implemented  with  respect  to  the  conditions  of  operation  of 
crowdfunding platforms, scope of permitted activities and licencing requirements. As a result 
of  the  different  regulatory  approaches,  platform  business  models  are  not  easily  passportable 
across the Union. Given the uncertainty and high compliance costs for platforms in a cross-
border  setting  that  arise  due  to  the  lack  of  an  appropriate  EU  framework  for  crowdfunding 
activity, crowdfunding services providers are facing difficulties in scaling their operations and 
cross-border flows remain limited. 

to 

The European Parliament and the Council adopted Regulation (EU) XXX/XXX on European 
crowdfunding  service  providers1  with  a  view,  among  others,  to  set  out  proportionate 
requirements to the provision of crowdfunding services and to facilitate their provision on a 
cross-border  basis,  while  managing  operational  risks  and  ensuring  a  high  degree  of 
transparency and investor protection. Regulation (EU) XXX/XXXX [Regulation on European 
crowdfunding  service  providers]  provides  for  uniform,  proportionate  and  directly  applicable 
requirements for authorisation and supervision together with a single point of supervision. 

1 

Regulation  (EU)  No  XXXX/XXXX  of  the  European  Parliament  and  of  the  Council  on  European 
crowdfunding service providers (OJ L […], […], p. […]). 

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In  addition,  given  the  need  to  ensure  a  clear  separation  of  services  in  order  to  manage 
conflicts  of  interest  and  to  ensure  effective  supervision,  a  person  authorised  as  a 
crowdfunding service provider under Regulation (EU) XXX/XXXX [Regulation on European 
crowdfunding  service  providers]  should  not  be  authorised  under  Directive  2014/65/EU,  and 
vice versa. 

In  the  interest  of  legal  certainty  and  in  order  to  avoid  the  application  of  requirements 
stemming  from  Directive  2014/65/EU  to  the  provision  of  crowdfunding  services,  it  is 
necessary to explicitly specify that Directive 2014/65/EU does not apply to persons authorised 
as crowdfunding service providers as defined in Regulation (EU) XXX/XXX,  

To this end, this proposal exempts crowdfunding service providers from the obligations under 
Directive 2014/65/EU on the markets in financial instruments. 

• 

Consistency with existing policy provisions in the policy area 

The  provision  of  crowdfunding  services  across  the  Union  is  regulated  by  Regulation  (EU) 
XXXX/XX  on  European  crowdfunding  service  providers,  in  relation  to  which  the  present 
Proposal is complementary. 

• 

Consistency with other Union policies 

The proposal  is  consistent and complementary to  Regulation (EU) XXXX/XX on  European 
crowdfunding  service  providers  in  the  European  Union,  which  aims  to  broaden  access  to 
finance  for  innovative  companies,  start-ups  and  other  unlisted  firms,  in  line  with  the 
Commission's priority of establishing a CMU. By providing crowdfunding service providers 
with  a  more enabling legal framework  such  Regulation complemented by the proposal seek 
helping  start-ups  and  SMEs  to  access  to  alternative  sources  of  capital  in  line  with  other 
initiatives  that  have  sought  to  facilitate  access  to  finance  for  these  entities,  such  as  the 
framework for European Venture Capital Funds. 

The  initiative  is  also  part  of  the  European  Commission's  FinTech  Action  Plan,  designed  to 
help  better  understand  and  enable  technology  to  support  the  financial  services  sector.  In 
effect, the financial services sector is the largest user of digital technologies and represents a 
major driver in the digital transformation of our society. These new technologies are changing 
the way consumers and firms access services, as well as improving the ability to understand 
and measure risks. The Commission aims to opt for a more innovation-oriented approach to 
FinTech  by  facilitating  a  regulatory  environment  where  innovative  financial  services, 
products  and  solutions  can  be  rolled  out  across  the  EU  in  a  safe,  financially  stable 
environment for investors and firms alike. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The  legal  basis  for  this  proposal  is  Article  53(1)  of  the  Treaty  on  the  Functioning  of  the 
European  Union  (TFEU),  which  allows  the  adoption  of  measures  for  the  approximation  of 
national  provisions  concerning  the  access  to  the  activity  of  investment  firms,  regulated 
markets and data service providers. 

• 

Subsidiarity 

Under Article 4 TFEU, EU action for completing the internal market must be appraised in the 
light  of  the  subsidiarity  principle  set  out  in  Article  5(3)  of  the  Treaty  on  European  Union 
(TEU). It must be assessed whether the objectives of the proposal could not be achieved by 

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the  Member  States  in  the  framework  of  their  national  legal  systems  and,  by  reason  of  their 
scale and effects, are better achieved at EU level.  

The varying approaches taken by the Union Member States and their different interpretations 
of crowdfunding activity have made difficult for crowdfunding service providers to pass port 
their  services  through  the  EU.  The  Commission  Services  have  been  monitoring  the  market 
since  2013  and  have  recognised  increasing  divergence  and  amplification  of  problems  that 
warrant  EU-level  intervention.  Moreover,  there  is  no  coordination  effort  undertaken  so  far 
among Member States on rules for lending services by non-deposit-taking institutions and the 
application  of  MiFID 
remains 
insufficiently  uniform  to  enable  cross-border  activity.  Further  action  taken  by  the  Member 
States can only remedy their own internal market, which would not be sufficient to reduce the 
negative impact on the functioning of the Single Market. 

investment-based  crowdfunding  platforms 

rules 

to 

Therefore,  the  objective  of  easing  access  to  seed  and  early  stage  financing  for  innovative 
companies, start-ups and other unlisted firms as well as the provision of a clear, uniform and 
transparent regulatory environment for investors wishing to support these projects cannot be 
reached through individual action by the Member States. 

• 

Proportionality 

Under the principle of proportionality, the content and form of EU action should not exceed 
what is necessary to achieve the objectives of the Treaties.  

Crowdfunding  is  about  smaller  capital  raising  activities  for  new  start-ups  or  small  scale  up 
businesses.  However,  in  some  Member  States,  providers  would  have  to  apply  the  existing 
sectorial legislation, such as MiFID II and MiFIR. Those rules might be disproportionate for 
small  activities.  Furthermore,  these  rules  may  not  be  fit  for  purpose.  Crowdfunding 
encompasses  many  different  business  models,  which  might  not  all  be  addressed,  and  could 
therefore have unpredictable regulatory spill-over effects. As a result, it may not be possible 
to capture, in a proportionate way, a growing number of platforms mixing different business 
models, which may involve lending and investment-based dealings as well as the use of newly 
emerging, undefined instruments.  

For these reasons, the exemption of crowdfunding service providers from MiFID obligations, 
and  the  subsequent  exclusive  application  of  the  Regulation  (EU) XXXX/XX  over  these 
persons,  would  result  in  a  more  proportionate  regulatory  environment  for  crowdfunding 
service providers. 

Moreover,  this  would  determine  a  rather  swift  and  sizeable  reduction  of  market  entry  costs 
(regulatory  and  supervisory  costs)  for  crowdfunding  platforms  operating  (or  intending  to 
operate) cross-border, since they would only be authorised once, and would benefit from the 
reduction of regulatory uncertainty. 

• 

Choice of the instrument 

Article 53(1) of TFEU allows for the adoption of acts in the form of a directive or regulation. 
Amendment  of  the  scope  of  Directive  2014/65/EU  can  be  achieved,  in  the  most 
straightforward  and  legally  coherent  manner,  by  virtue  of  a  Directive  of  the  European 
Parliament and of the Council amending Directive 2014/65/EU. 

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3. 

• 

IMPACT ASSESSMENTS 

Impact assessment 

The  main  economic  and  social  impacts  have  been  thoroughly  examined  in  the  IA 
accompanying the proposal for a Regulation of the European Parliament and of the Council 
on European crowdfunding service providers. 

• 

Regulatory fitness and simplification 

Not applicable. 

• 

Fundamental rights 

There is no relevant impact on fundamental rights from this initiative. 

4. 

BUDGETARY IMPLICATIONS 

This proposal does not have implications for the Union budget. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

Not applicable. 

• 

Detailed explanation of the specific provisions of the proposal 

Article 1 is the only substantial provision of the proposal. It modifies the scope of Directive 
2014/65/EU by adding crowdfunding service providers authorised under the Regulation (EU) 
XXX/XXXX  [Regulation  on  European  crowdfunding  service  providers]  to  the  list  of 
exempted  entities  to  which  the  scope  of  Directive  2014/65/EU  does  not  apply.  Article 2 
requires  Member  States  to  ensure  transposition  of  the  provisions  of  the  Directive.  Article 3 
sets out the date of the entry into force of the amended Directive 2004/65/EU. 

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2018/0047 (COD) 

Proposal for a 

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Directive 2014/65/EU on markets in financial instruments 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 53(1) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Central Bank2, 
Having regard to the opinion of the European Economic and Social Committee3, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

2 
3 
4 

5 

Crowdfunding  provides  alternative  access  to  finance  for  businesses, 
contributing to the objectives of the Capital Markets Union (CMU).  
Under  Regulation  (EU)  XXX/XXX  of  the  European  Parliament  and  of  the  Council4 
legal  persons  can  choose  to  apply  to  the  European  Securities  and  Markets  Authority 
for an authorisation as crowdfunding service providers.  

thereby 

Regulation  (EU)  XXX/XXXX  [Regulation  on  European  crowdfunding  service 
providers] provides for uniform, proportionate and directly applicable requirements for 
authorisation  and  supervision  of  crowdfunding  service  providers  and  centralises 
supervision  of  those  crowdfunding  service  providers  by  the  European  Securities  and 
Markets Authority. 

To provide legal certainty as to the scope of persons and activities falling within the 
respective scope of Regulation (EU) XXX/XXXX and of Directive 2014/65/EU of the 
European Parliament and of the Council5, and in order to avoid that the same activity 
is  subject  to  different  authorisations  within  the  Union,  legal  persons  authorised  as 
crowdfunding  service  providers  under  Regulation  (EU)  XXX/XXXX  [Regulation  on 
European  crowdfunding  service  providers]  should  be  excluded  from  the  scope  of 
Directive 2014/65/EU. 

OJ C […], […], p. […]. 
OJ C […], […], p. […]. 
Regulation (EU) XXX/XXX of the European Parliament and of the Council on European crowdfunding 
service providers (OJ L […], […], p. […]). 
Directive  2014/65/EU  of  the  European  Parliament  and  of  the  Council  of  15 May  2014  on  markets  in 
financial  instruments  and  amending  Directive  2002/92/EC  and  Directive  2011/61/EU  (OJ  L  173, 
12.6.2014, p. 349). 

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(5) 

As the amendment provided for in this Directive is directly linked to Regulation (EU) 
XXX/XXXX [Regulation on crowdfunding services in the European Union], the date 
from  which  Member  States  are  to  apply  the  national  measures  transposing  that 
amendment  should  be  deferred  in  order  to  coincide  with  the  date  of  application  laid 
down in that Regulation, 

HAVE ADOPTED THIS DIRECTIVE: 

In Article 2(1) of Directive 2014/65/EU, the following point (p) is added: 

Article 1 

crowdfunding  service  providers  as  defined  in  Article 3(1)(c)  of 

“(p) 
Regulation (EU) XXX/XXX of the European Parliament and of the Council*. 

_____________________________________________________________ 

* 
European crowdfunding service providers (OJ L […], […], p. […]).”. 

Regulation  (EU)  XXX/XXX  of  the  European  Parliament  and  of  the  Council  on 

Article 2 

1. 

2. 

Member States shall adopt and publish, by [Publications Office: 6 months from entry 
into force of the Crowdfunding Regulation], the laws, regulations and administrative 
provisions necessary to comply with this Directive. 

Members States shall apply those measures from [Publications Office: date of entry 
into application of the Crowdfunding Regulation]. 

Member States shall communicate to the Commission and to ESMA the text of the 
main  provisions  of  national  law  which  they  adopt  in  the  field  covered  by  this 
Directive. 

This Directive shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 3 

This Directive is addressed to the Member States. 

Done at Brussels, 

Article 4 

For the European Parliament 
The President 

For the Council 
The President 

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