New Rules for Equity Crowdfunding in Italy

On February 24, 2016, the Italian securities market regulator (Commissione Nazionale per le Società e la Borsa, Consob), updated the regulations for equity based crowdfunding. It was published in the Gazzetta Ufficiale on March 4, 2016, with the new rules effective since March 5, 2016.

Italy was the first country to regulate digital investing through online funding portals, but despite that the equity crowdfunding market has been slow to take off (with just over €3 millions in total raised). It’s believed this is mainly because of the intrinsic limitations with the regulations, considered too restrictive and burdensome, and the environment, that was much less innovation-friendly than it is today.

The approach has initially been cautious, but the Consob is now showing great interest for the market and made significant improvements to the framework for crowdfunding regulation with these changes. This is the second time the rules are updated since they were initially enacted in July 2013, and then expanded to “Innovative SMEs” in January 2015.

The aim of these updated rules is to simplify the regulatory framework, trying to reduce the costs of collecting money through online funding portals, expand the range of subjects able to invest money into innovative business ventures and keep all the investment process online through the equity crowdfunding platforms. Consob says that these reforms aim to lay the foundations for the development of equity crowdfunding as a funding channel for innovation in Italy, as an alternative to the traditional finance instruments.

What are the main changes?

Procedure simplification
Among the main innovations is the simplification of the procedure, with the investment suitability tests, based on the investor knowledge and experience, that will be carried out by the portal operators, while before it was responsibility of the banks to verify the requirements. It could be seen as representing a significant potential catalyst for the markets development.

Two categories of investors
In order to to successfully complete an equity crowdfunding campaign is required that a 5% of the offer is subscribed by professional investors like banks, investment firms and mutual investment funds. With this reform two new categories, that will be considered the same as professional investors, are introduced:

  1. “professional investors on request“, as defined in the European Union with the MiFID (Markets in Financial Instruments Directive), The investors should meet at least two of these criteria: a) the client has carried out significant transactions on that specific market with an average frequency of 10 operations per quarter over the previous four quarters; b) the value of the client’s financial instruments portfolio, including cash deposits, must exceed €500,000; c) the client works or has worked in the financial sector for at least one year in a professional position which requires knowledge of the operations or services envisaged.
  2. “investors supporting innovation“, identified by Consob on the basis of objective criteria.

You can learn more about these modifications with the original document published by Consob (in Italian) and with this article by Mariachiara Furlò on the SmartMoney section of Startupitalia.

It is difficult to say if digital investing will significantly expand in Italy with these updates, but the fact that regulators are reacting to the market feedback and the market seems more mature than three years ago are both encouraging signs.

For companies looking to leverage the online finance developments and new regulations, by entering the alternative finance industry, this could be the right time to do so.

Originally published at

Freelance writer & digital strategist. European Commission expert, Fintech curator at Techstars Startup Digest, SXSW advisory board member.

Freelance writer & digital strategist. European Commission expert, Fintech curator at Techstars Startup Digest, SXSW advisory board member.