The latest regulatory advances around Crowdfunding
Introduction
It is now official, Law 15.18 which defines the legal contours of Collaborative Financing or Crowdfunding has finally come into force. Published in the Official Bulletin of 08/31/2023, the various application texts definitively confirm the operationalization of the Law. The Crowdfunding ecosystem in Morocco can now start. Or almost !
The approval deposit: A step forward… obligatory
Players in the world of crowdfunding have been impatiently awaiting this announcement: the implementing texts of the new law regulating the crowdfunding sector have just been published in the Official Bulletin. This step marks a major step forward for crowdfunding platforms, for entrepreneurs, and for investors.
The main novelty is therefore the opening of the approval request process for crowdfunding platforms. Crowdfunding operators can now prepare their files with a view to obtaining the necessary approval to operate legally.
Indeed, to operate a Crowdfunding or Collaborative Financing (PFC) platform, approvals must be obtained from regulators: The Collaborative Financing Company (SFC), the Platform and the Shareholders must be approved.
Two regulators are concerned by Collaborative Financing:
- Bank Al Maghrib (Central Bank) regulates Donation and Loan Collaborative Financing
- Moroccan Capital Markets Authority (AMMC) regulates Investment-type Collaborative Financing.
More clarity for investors
The regulations aim to strengthen investor security and stimulate growth of the sector by providing a solid legal framework. Crowdfunding platforms will have to comply with strict standards on investor protection, information disclosure and risk management.
Investors will thus have access to a more transparent overview of available investment opportunities. This increased transparency aims to strengthen investor confidence in the crowdfunding sector.
An ecosystem to set up
If the Law is in force and crowdfunding operators can finally submit their approval files to offer their services, the ecosystem, including the regulatory one, must be put in place:
- Account Keeping Establishment or ETC. “The SFC must conclude, for the purposes of the activities of its PFC, a service provision contract with an account-keeping credit institution approved by Bank Al-Maghrib, hereinafter referred to as an “account-keeping establishment”. The SFC must open, for each project presented, a special account with the account-keeping establishment. Said account is exclusively allocated to the deposit of funds collected for each project concerned and, where applicable, for the payment of sums due to contributors” Extract from Law 15.18. The establishment of ETCs is therefore a prerequisite for starting financing operations.
- The CBSA: An Association of Collaborative Financing Companies, defined by law, must see the light of day. All operators must adhere to it.
In addition to these actors defined in the Law, banks, payment institutions, associations, support structures, incubators, accelerators, must get to work together to make Collaborative Financing successful, because everyone has their role to play to the development of this sector.
Ceilings, ceilings and ceilings
The regulations introduce caps on different aspects of crowdfunding. There are specific limits for each type of collaborative financing, whether donations, loans or investments. Additionally, each project has a funding cap, and individual investors are subject to limits on the total amount they can invest.
These caps aim to reduce risks for investors and promote appropriate diversification.
Real estate excluded… but not only
One of the important provisions is the exclusion of the real estate sector from collaborative financing. This means that real estate-related projects can no longer be financed via crowdfunding platforms. This decision aims to concentrate investments in other areas while ensuring investor protection.
But the Law also provides for the exclusion of the financing of political parties or political activities and the financing of religious activities.
Conclusion
The new regulations bring a breath of fresh air to the crowdfunding sector, providing a clear framework for the development of the sector. Crowdfunding platforms are now ready to begin the process of obtaining approval and complying with the new standards.
The sector is evolving rapidly, and it is essential for all crowdfunding players