As a global professional body representing a large number of finance professionals advising SMEs on a daily basis, ACCA recognises the potential for harmonised regulation to improve the chances of SMEs securing the financing they need to grow. However, ACCA warns that striking the right balance between regulating crowdfunding platforms and encouraging competition is vital in order to allow this increasingly important area of SME finance to continue developing in the future.
Ben Baruch, head of SME Policy at ACCA, explains: ‘More SMEs are starting up and looking to grow across Europe. They should be supported at all stages of their business life cycle - having access to the appropriate sources of external finance is a crucial part of achieving this. Although, for the time being, debt finance via high street banks is likely to remain the preferred choice of funding for the majority of Europe’s SMEs, encouraging the growth of alternative funding options is essential towards delivering better functioning SME finance markets. ACCA believes this can be supported through the development of a proportionate and effective framework for crowdfunding regulation,’ Baruch adds.
The Capital Markets Union (CMU) Action Plan identified the importance of breaking down the information barriers that stand between SMEs and potential investment. Whilst FinTech solutions can help, innovation can also give way to risks such as fraud and liquidity risks. ACCA believes the new crowdfunding legal framework needs to ensure that providers of crowdfunders deliver the right level of information to businesses regarding the risks as well as receiving adequate protection from becoming overexposed to riskier investments.
Baruch continues: ‘The current framework for regulating crowdfunding platforms is fragmented - with inadequate investor and consumer protection as well as a lack of cross-border provisions. The creation of a Europe-wide framework could enhance transparency and traceability, and could therefore enable SMEs to better understand the opportunities and risks of accessing this type of funding.’
However, ACCA also stresses that more clarity is needed on the interaction between this new framework and existing EU directives, such as MIFID, which are already used by some member states to regulate crowdfunding.
Notes to Editors
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