The new Crea y Crece Law, recently approved, adapts the European Regulation for PFP (Crowdfunding Platforms), now called PSFP (Crowdfunding Services Providers). As usual, at Fellow Funders, we have rushed to adapt to this new European directive and have already authorization from the Comisión Nacional del Mercado de Valores (CNMV) to operate under this new law.
The investment “ceiling” is increasing
What does this new regulation entail? First, the investment “ceiling” rises considerably for the PSFP. The maximum amount permitted for investment rounds rises to five million euros for all investor profiles.
This increase is astonishing news for Fellow Funders. The first rounds, where the amount was around €100,000, are a thing of the past. In 2021, we overfunded two funding rounds in which we raised a capital round of €1.5M.
In recent years, the increase in the number of investors on our platform has translated into a continuous growth in the demand for tickets, resulting in the need for an increase in the “ceiling” of our current rounds. Moreover, these rounds will no longer be subject to a minimum underfunding of 90% or a maximum overfunding of 125%, allowing us to be more flexible in our funding requirements and optimal targets for both companies and investors.
No more investment limits
Investors will be classified into sophisticated and unsophisticated investors. However, there will be no investment limits for either of them. On the other hand, this new regulation aims for increased transparency and investor protection, and requires a suitability test and a risk simulation.
Since unsophisticated investors do not have as much experience as professional investors, they are more susceptible to the risks involved in investments. The following infographic shows the main characteristics and differences between sophisticated and unsophisticated investors:
Infographic on New European Regulation on Crowdfunding Platforms
The following infographic shows the main characteristics and differences between sophisticated and unsophisticated investors.
Information for unsophisticated investors
Regarding transparency changes, we have always been a step ahead at Fellow Funders. We always based our activity on trust, transparency, and continuous monitoring of the projects. For this reason, all our transparency activities are well above the limits established by the Regulation.
Simulation of ability to handle losses
Before giving unsophisticated investors full access to investment opportunities, we will evaluate whether the services offered are appropriate to their characteristics. This assessment will be based on their experience, previous investments, investment objectives, and financial situation. Moreover, we will check that they are aware of the investment risks. Such an assessment will have to be renewed every two years.
Once all the information has been gathered, the PSFP must evaluate the investors’ expertise and the projects’ suitability to their profile. If any of these requirements are not met, investors will have to be informed of the risks involved in the investment. Investors will only be allowed to invest once they have acknowledged receipt of their simulated ability to handle losses and potential risks.
Some other changes are the implementation of a cooling-off period of four days and the prohibition for PSFPs to invest in their own projects. As a result, our famous “Fellow invests” label will disappear once the regulation comes into force. The new law will allow PFPs to manage portfolios and establish special purpose vehicles for managing specific projects.
Feel free to consult us!
In a context where crowdfunding models continue to gain presence and acceptance, these changes are major “game-changers”. We, at Fellow Funders, appreciate these changes, since they allow us to continue expanding towards our goal of universalizing alternative financing. We have already adapted to these regulatory changes and have authorization from the Comisión Nacional del Mercado de Valores (CNMV). So, feel free to contact us if you have any questions!