MFSA Circular: ESMA Q&A on ECSPR

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This article explores the recent Malta Financial Services Authority (MFSA) Circular, issued in response to the European Securities and Markets Authority’s (ESMA) Q&A on the European Crowdfunding Service Providers for Business Regulation (ECSPR). Confusing much? Not to worry! Max Frilot breaks down the crucial points ESMA raise in the Q&A form. Consequently, this article provides the purpose and some highlights of the circular itself.

Find out more below about CSPs, SPVs, and the ECSPR. Also, why not check out how MK Fintech Partners can help your business! Subsequently, our experienced team can undertake a review of your needs and assist you with regulatory compliance. Our team’s caliber and our dedication to providing clients with the cost-effective solutions are the cornerstone of our success.

Purpose and Highlights of the MFSA Circular

MFSA Circular & ESMA Q&A

The MFSA drafted a circular in relation the Q&A form that ESMA updated and published. This Q&A document is based on the European Crowdfunding Service Providers for Business Regulations (ECSPR). First, one should read the circular in conjunction with the ECSPR. Second, one should also heed the delegated regulations, and other circulars the Authority issued previously.

The circular mainly provides clarifications regarding the definition of a Special Purpose Vehicle (SPV). Furthermore, it explains the CSP’s role in participating in a SPV, along with elaboration upon proof of own funds. It also raises important points relating to updates to the Q&A document. Particularly in 1.6 and 1.7 of Section 3: Use of special purpose vehicles, and 6.3 of Section 8: Authorisation and supervision of Crowdfunding Service Providers (CSPs).

The circular’s main purpose is to:

  • Inform market participants about the updated Q&A document.
  • Promote common supervisory approaches and practices in the application of ECSPR.
  • Provide responses to questions from the general public regarding the practical application of ECSPR.
  • Include answers provided by the European Commission (EC) in accordance with Regulation 2010/1095.
Fintech Crypto Regulation MFSA Circular ESMA Q&A European Crowdfunding Service Providers for Business Regulations (ECSPR) SPV Crowdfunding Service Providers (CSPs) proof of own funds CSPs European Central Bank


ESMA Q&A | Question 1.6 of Section 3

                     “When should an entity be considered as an SPV within the meaning of point (q) of Article 2(1) of the ECSPR?

In point (q) of Article 2(1), the ECSPR defines an SPV as an entity created solely for (or an entity which solely serves the purpose of) a securitisation as defined in point (2) of Article 1 of Regulation (EU) No. 1075/2013 of the European Central Bank (ECB).

In turn, point (2) of Article 1 of Regulation (EU) No. 1075/2013 defines securitisation as a transaction or scheme where a separate entity, distinct from the originator or insurance or reinsurance undertaking, issues financing instruments to investors. This separate entity is created for (or serves the purpose of) the transaction or scheme. Furthermore, it involves the transfer of assets or part thereof to this entity, either through the transfer of legal title or beneficial interest from the originator or through sub-participation.

So, what do we get after breaking down these definitions, and considering the content of recital (22) of the ECSPR? An entity is an SPV within the meaning of point (q) of Article 2(1) if and when it meets the following conditions.

  • The created entity is for (or used for the purpose of) the transaction. Specifically, the  project’s financing.
  • The project owner separates themselves from the entity.
  • The entity is interposed between the crowdfunding project and investors.
  • The entity receives, directly or indirectly, a transfer of legal title or beneficial interest over the crowdfunding project from the project owner.

If the competent authority reaches this conclusion based on the information provided by the CSP, the SPV set-up would need to comply with the requirements of the ECSPR, particularly Article 3(6).


ESMA Q&A | QUESTION 1.7 of Section 3

                                                                                  “Can a CSP hold a participation in a SPV?”

Article 8(1) of the ECSPR states that CSPs are not allowed to participate in any crowdfunding offer on their platform. This requirement stems from the principle outlined in recital (26) of the ECSPR, emphasising that CSPs should operate as neutral intermediaries between project owners and investors on their crowdfunding platforms.

Therefore, a CSP cannot hold a participation in a Special Purpose Vehicle (SPV). Nor can it participate in any other entity that is interposed between the crowdfunding project and investors (unless the CSP demonstrates to the national competent authority that such participation does not equate to a participation in the underlying crowdfunding offer). In other words, the participation should not undermine the CSP’s neutrality towards its clients.

A national competent authority may consider that the CSP’s participation does not constitute a participation in the crowdfunding offer and does not compromise its neutrality if it receives evidence that the participation does not create a distinct economic incentive for the CSP, apart from its service fees. The authority needs assurance that the CSP’s participation does not create conflicts of interest.

Assessing the nature of the CSP’s participation in an SPV, and its potential impact on neutrality, is conducted on a case-by-case basis by the competent authority. Some indicative characteristics considered during the assessment include the nature and characteristics of the CSP’s participation (equity or debt instruments, voting rights, economic rights), the size/relative value of the participation compared to investors’ participation, and the permanent or temporary nature of the participation.

If a CSP replicates a similar SPV setup in other crowdfunding offers, and the competent authority has already provided its opinion on the setup, the CSP can proceed without seeking the authority’s view each time, as long as it has an agreement with the authority. CSPs must adhere to the requirement of neutrality. Additionally, they must seek they Authority’s approval regarding their participation in SPVs or similar entities to ensure compliance with the ECSPR.

Fintech Crypto Regulation MFSA Circular ESMA Q&A European Crowdfunding Service Providers for Business Regulations (ECSPR) SPV Crowdfunding Service Providers (CSPs) proof of own funds CSPs European Central Bank


ESMA Q&A | question 6.3 of Section 8

When applying for the authorisation as a CSP, what are the proofs of own funds that existing undertakings can provide to the relevant authorising authority for the purpose of point (i) of Article 12(2) of the ECSPR and Field 10 of the Annex to the Delegated Regulation 2022/2112?

As mentioned in the Q&A, according to Article 12(2)(i) of the ECSPR applicants seeking authorisation as a CSP must provide proof that they meet the prudential safeguards outlined in Article 11 of the regulation. Field 10, point 1, letter (a) of the Annex to the Delegated Regulation 2022/2122 further specifies that applicants must submit documentation on how they calculated the amount of the prudential safeguards in accordance with Article 11 of the ECSPR.

Additionally, Field 10, point 1 of the Annex establishes the requirements for proof of own funds for both existing undertakings and newly incorporated entities. Furthermore, existing undertakings must provide the authorising authority with an audited account statement or a public register certification that verifies the amount of their own funds.

However, ESMA recognises that in cases where a public register is not available and full annual financial statements are not audited, the relevant authorising authority may accept a certification from an independent auditor. This certification should confirm the existence and full availability of their own funds based on the accounts the applicant provides. ESMA also clarifies that for the purpose of Field 10, point 1 of the Annex, undertakings that were incorporated after November 10, 2021, but that the MFSA does not yet authorise and is non-active, should not be considered as existing undertakings.

In summary, CSP applicants must provide evidence that they meet prudential safeguards. This will include documentation on the calculation of their own funds. Existing undertakings can submit audited account statements or public register certifications, while newly incorporated entities may provide certifications from independent auditors. Undertakings incorporated after November 10, 2021, without authorisation or activity, are not classified as existing undertakings for these purposes.

More Information

MFSA Circular & ESMA Q&A

If you wish to learn more about the Q&A or the MFSA’s ciurcular, kindly check the links provided below.

MFSA Circular.

ESMA Q&A Document.

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The content of this article is valid  at the date of its first publication. It intends to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information you read. For further information, contact us at MK Fintech Partners via email at or by telephone +356 2016 1010.

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