Article 30 of the Law Decree No. 179 dated October 18, 2012 has introduced, among other things, into the Consolidated Finance Law articles 50-d and 100-ter – respectively called Management of portals for raising capital for innovative start-ups and Offers made through portals for raising capital – delegating the Italian Stock Exchange Commission (Consob) to pass the necessary implementing provisions.
These new provisions aim to regulate the phenomenon known as equity crowdfunding which enables (usually newly formed) enterprises to raise venture capital (funding) via the Internet, thereby appealing to a large number of recipients (crowd), which in practice make modest investments.
This method of fundraising was originally used for non-profit initiatives (i.e. donations), then undergoing a sea change and ending up also being applied to the creation of business ventures (with the recognition of a small reward-based fee) with a view to making investors subscribing equity.
It should be noted that Consob has of yet only issued a draft regulation, which is still in the consultation phase (there being the possibility of changes being made before the final approval thereof).
As regards the scope of application of the new articles 50-d and 100-ter of the Consolidated Finance Law, it should first be noted that only equity in innovative start-ups (including shares in limited liability companies) issued by innovative start-ups (which carry out activities in technological fields or in one of the fields identified in the law on social enterprises) may be offered on-line.
Non-professional investors must be provided with all the necessary data in order to make an informed decision in relation to the risk of the investment, since crowdfunding involves financial instruments being offered that are by their very nature risky.
From a subjective point of view the decree allows two types of figures to manage online portals for raising capital:
- Banks and investment firms that are authorized to provide investment services (Article 50-d, paragraph 2 of the Consolidated Finance Law);
- Persons recorded in a register kept by Consob.
The rules governing the provision of investment services (rules of conduct; articles 21 to 25-bis of the Consolidated Finance Law; article 32 of the Consolidated Law on Finance) do not apply since, in accordance with article 50-d, paragraph 5, letter. d) of the CFL, the rules of conduct that will be applied to investor relations shall be defined by Consob.
As regards persons recorded in the Consob register, the related orders will be processed by banks and investment firms, which are subject to the rules provided for in the CFL and Intermediaries Regulation governing the provision of investment services.
Under the new article 50-d of the CFL Consob will:
a) Set out what are the requirements – in terms of integrity – of those persons that control a portal manager, as well as of individuals that perform administrative, management or control activities (paragraph 3, letter d);
b) Establish the professional requirements for persons who perform administrative, management and control activities in a portal manager;
c) Establish principles and criteria (paragraph 5) in relation to:
1. The establishment of the registry and related forms of notice;
2. Any additional conditions for recordal in the register, as well as the grounds for suspension, cancellation therefrom and re-admission thereto;
3. Any further grounds for incompatibility;
4. The rules of conduct with which portal managers must comply in dealing with investors, providing for a simplified regime for professional clients.
Pursuant to the new article 100-ter, Consob shall lay down the rules applicable to tenders conducted through such portals in order to:
a) Ensure that professional investors or special categories of investors identified by the latter subscribe a portion of the securities being offered (when the offer is not restricted exclusively to business customers);
b) Protect investors other than professional clients in the event that the controlling shareholders of innovative start-up dispose of their shares to a third party after the offer has been made.
