On Friday 12th of July, the CONSOB – the Italian financial securities commission – proudly announced that Italy was going to be the first country in Europe to enact regulations for equity crowdfunding.

The CONSOB commissary said its hopes were that the law will not only be a way to revitalize the struggling seed capital market in Italy but also be a message to the Italians that the community has still the power to create concrete successes, if mutual trust exists.
From this week, the Italian equity crowdfunding platforms that have been waiting for many months for this moment are allowed to start their operations and investors are authorized to make investments through them.

Let’s briefly go through the recently released regulation and have a look at the most important points.
Who can get crowdfunded?
The only startups that are permitted to raise capital through equity crowdfunding platforms are the so-called “Innovative startups”, that is, startups that are recognized as such by the Chamber of Commerce, because, for example, have invested in R&D activities or employ researchers. In order to finalize the crowdfunding campaign the innovative startups require a professional investor, a bank foundation, a financial corporation or an incubator that subscribes at least 5% of the capital offered. The maximum amount that a startup can raise is set at €5 million. Furthermore, the innovative startups using equity crowdfunding to finance themselves are required to insert a clause in their statute which guarantees to the investors the right to withdraw from the investment and to sell their shares, in case the major shareholder sells its stake to a third party.

Who can invest?
CONSOB chose to be open on this side and did not limit the possibility to invest through an equity crowdfunding platform to any specific category of investor. The only requirement for investors when investing through a crowdfunding platform is to take a test to demonstrate that they are aware of the risks they are taking when investing, and that they can afford the possible loss of the amount invested. Investors can withdraw their commitment at any moment until when the crowdfunding campaign is closed.

The platforms and their obligations

Two categories of entities are allowed to start an equity crowdfunding platform:
1) The “permitted managers”, that is banks and other financial institutions.
2) The “to-be-permitted managers”, that is all the people that match certain requirements of professionalism and trustworthiness. In particular, the former refers to the experience and the skills of the manager in specific fields – e.g. the financial sector – while the latter refers, for example, to the absence of penal prosecutions.

The platforms have then some obligations to respect, in order to guarantee transparency and investors protection. For instance, they are responsible to verify that the startups have all the necessary requirements to register on the portal and that the amount invested by each crowdfunder is congruent with his/her income.

A lot of debates and discussions surrounded this law up to its enactment, with some people saying it is too restrictive, and others saying that it does not do enough to protect the investors. Whatever the opinion, the important thing is that it is now possible for innovative startups to raise capital through equity crowdfunding. In a year’s time CONSOB will evaluate the impact of the regulation on the Italian crowdfunding market and decide whether it is necessary to modify the law or not. We believe a gradual development of the sector is better and more sustainable than a drastic one, giving the time for the authorities and the crowd to understand fully the phenomenon.

CONSOB (2013).Scheda sintetica sui contenuti del regolamento in materia di “Raccolta di capitali di rischio da parte delle startup innovative tramite protali on-line”.
CONSOB (2013). Regolamento in materia si “Raccolta di capitali di rischio da parte di startup innovative tramite portali on-line”. Documento di consultazione.
This post by Irene Todera was first published on the Crowd Valley Blog

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