The specialist lawyer Lutz Auffenberg and his law firm Fin Law have specialized in the field of fintech and innovative technologies. In particular, blockchain technology and its regulation are the focus of its activities. In his guest contribution, he addresses the question of whether the swarm finance ordinance offers an interesting alternative to token offers without a prospectus.
This article first appeared on the Fin Law blog.
The crowdfunding regulation (Regulation (EU) 2020/1503 – European Crowdfunding Service Provider Regulation – ECSPR), which came into force on November 10, 2021, made it possible for issuers of tokenized financial instruments to raise up to 5 million euros within The EU. without having to publish a prospectus or an approved securities information sheet (WIB) approved by BaFin for this purpose. The prerequisite for this is the participation of a licensed crowdfunding service provider, which provides a special platform for the offer. The new regulation is seriously competing with the classic route with a securities prospectus or WIB, especially for smaller issuance projects. Because the option to forgo a prospectus or other offering documentation is not the only potential advantage for providers who want to bring their tokens to investors with the help of a crowdfunding service provider.
There is no subordination requirement for offers according to the Crowdfunding Service Providers Regulation.
In its area of application, the ECSPR takes precedence over some other regulations of the financial supervision law, such as the German Banking Law (KWG). To avoid the act of depositing business requiring authorization when raising capital from investors, a qualified subordination for tokenized bonds is often agreed in practice in practice. The qualified subordination of investors serves to eliminate the unconditional redemption claim of investors, which is a legal requirement of the deposit business. These funds do not have to be used under the crowdfunding ordinance. This results in new opportunities to make tokenized financial instruments more attractive to investors.
Cross-border offers with a simple investment information sheet according to ECSPR
To offer its tokens to investors, the issuer must create an investment information sheet with a maximum of six A4 pages. Swarm’s financial services provider verifies the information on the investment information sheet to verify that it is complete, correct and clear. BaFin approval is not required. If the crowdfunding service provider also advertises its offers in other Member States, the key investment information sheet should also be available to investors in the official language of the respective Member State or in a language accepted by the competent authorities of that Member State. If this requirement is met, the offer can also be made in various EU member states.