CROWDFUNDING SERVICE PROVIDERS ACT

CHAPTER 637

CROWDFUNDING SERVICE PROVIDERS ACT

AN ACT to provide for the establishment of a framework for

crowdfunding service providers for business and the requirements for

the provision of crowdfunding services, for the organisation,

authorisation and supervision of crowdfunding service providers, for

the operation of crowdfunding platforms as well as for transparency

and marketing communications in relation to the provision of

crowdfunding services in the European Union.

14th July, 2023

ACT XXV of 2023, as amended by Act XI of 2025.

(1)

The short title of this Act is the Crowdfunding

Service Providers Act.

(2) The applicability and purpose of this Act is to

implement the relevant provisions of the ECSP Regulation as herein

defined, and they shall be interpreted and applied accordingly.

(1)

In this Act, unless the context otherwise

requires

"admitted instruments for crowdfunding purposes" shall

have the same meaning as that assigned to it in paragraph (n)

of Article 2(1) of the ECSP Regulation;

"client" shall have the same meaning as that assigned to

it in paragraph (g) of Article 2(1) of the ECSP Regulation;

"competent authority" means the Malta Financial

Services Authority established by the Malta Financial Services

Authority Act;

CROWDFUNDING SERVICE PROVIDERS

"crowdfunding offer" shall have the same meaning as

that assigned to it in paragraph (f) of Article 2(1) of the ECSP

Regulation;

"crowdfunding platform" shall have the same meaning

as that assigned to it in paragraph (d) of Article 2(1) of the

ECSP Regulation;

"crowdfunding project" shall have the same meaning as

that assigned to it in paragraph (l) of Article 2(1) of the ECSP

Regulation;

"crowdfunding service provider" shall have the same

meaning as that assigned to it in paragraph (e) of Article 2(1)

of the ECSP Regulation;

"crowdfunding service" shall have the same meaning as

that assigned to it in paragraph (a) of Article 2(1) of the ECSP

Regulation;

"ECSP Regulation" means Regulation (EU) 2020/1503

of the European Parliament and of the Council of 7 October

2020 on European crowdfunding service providers for

business, and amending Regulation (EU) 2017/1129 and

Directive (EU) 2019/1937, as may be amended from time to

time, and includes any implementing measures, implementing

technical standards, regulatory technical standards, guidelines

and similar measures that have been or may be issued

thereunder;

"ESMA" means the European Securities and Markets

Authority, established by Regulation (EU) No 1095/2010 of

the European Parliament and of the Council of 24 November

2010;

"European regulatory authority" means the body or

bodies designated by a Member State or EEA State other than

Malta in accordance with Article 29 of the ECSP Regulation to

carry out the functions and duties provided for in the ECSP

Regulation;

"individual portfolio management of loans" shall have

the same meaning as that assigned to it in paragraph (c) of

Article 2(1) of the ECSP Regulation;

"investor" shall have the same meaning as that assigned

to it in paragraph (i) of Article 2(1) of the ECSP Regulation;

"loan" shall have the same meaning as that assigned to it

in paragraph (b) of Article 2(1) of the ECSP Regulation;

"management body" means the body or bodies of a

licence holder which are appointed in accordance with national

law and are empowered to set the strategy, objectives and

overall direction of the licence holder, and oversee and

monitor management decision making, and includes the

persons who effectively direct the business of the licence

holder;

"marketing communications" shall have the same

meaning as that assigned to it in paragraph (o) of Article 2(1)

of the ECSP Regulation;

"the Minister" means the Minister responsible for the

regulation of financial services;

"overseas regulatory authority" means an authority in a

country or territory outside Malta that is not a Member State or

EEA State which exercises any regulatory or supervisory

function in relation to financial services corresponding to a

function of the competent authority as defined in the Malta

Financial Services Authority Act;

"project owner" shall have the same meaning as that

assigned to it in paragraph (h) of Article 2(1) of the ECSP

Regulation;

"qualifying shareholding" means a direct or indirect

holding in a company which represents ten per centum (10%)

or more of the share capital or of the voting rights referred to

in Articles 9 and 10 of Directive 2004/109/EC of the European

Parliament and of the Council of the 15 December 2004 on the

harmonization of transparency requirements in relation to

information about issuers whose securities are admitted to

trading on a regulated market and amending Directive 2001/

34/EC taking into account the conditions regarding the

aggregation thereof laid in that Directive, or which makes it

possible to exercise a significant influence over the

management of the company in which that holding subsists,

and "qualifying shareholder" shall be construed accordingly;

"Regulation (EU) No 1095/2010" means Regulation

(EU) No 1095/2010 of the European Parliament and of the

Council of 24 November 2010 establishing a European

Supervisory Authority (European Securities and Markets

Authority), amending Decision No 716/2009/EC and repealing

Commission Decision 2009/77/EC, as may be amended from

time to time, and includes any implementing measures,

implementing technical standards, regulatory technical

standards, guidelines and similar measures that have been or

may be issued thereunder;

"Rules" means Rules issued by the competent authority

CROWDFUNDING SERVICE PROVIDERS

in accordance with this Act;

"transferable securities" shall have the same meaning as

that assigned to it in paragraph (m) of Article 2(1) of the ECSP

Regulation;

"working days" means days which shall not include

Saturdays and the days referred to in the National Holidays

and other Public Holidays Act.

(2) Words and expressions used in this Act which are also

used in the ECSP Regulation but which are not defined herein, shall

have the same meaning as that assigned to them in the ECSP

Regulation.

(3) In this Act and in any regulations made hereunder, if

there is any conflict between the English and the Maltese texts, the

English text shall prevail.

The provisions of this Act and any regulations or Rules

issued thereunder shall not apply to

(a)

crowdfunding services that are provided to

project owners that are consumers, as defined in point (a) of

Article 3 of Directive 2008/48/EC of the European Parliament

and of the Council of 23 April 2008 on credit agreements for

consumers and repealing Council Directive 87/102/EEC;

(b)

other services related to a crowdfunding service

and that are provided in accordance with national law;

(c)

crowdfunding offers with a consideration of

more than five million euro (€5,000,000), which shall be

calculated over a period of twelve (12) months as the sum of

(i)

the total consideration of offers of

transferable securities and admitted instruments for

crowdfunding purposes and amounts raised by means of

loans through a crowdfunding platform by a particular

project owner; and

(ii) the total consideration of offers to the

public of transferable securities made by the project

owner referred to in sub-paragraph (i) in its capacity as

an offeror pursuant to the exemption under Article 1(3)

or Article 3(2) of Regulation (EU) 2017/1129 of the

European Parliament and of the Council of 14 June 2017

on the prospectus to be published when securities are

offered to the public or admitted to trading on a

regulated market, and repealing Directive 2003/71/EC.

(1)

The competent authority shall carry out its

functions under this Act and, in particular, shall ensure compliance

with the provisions of the ECSP Regulation, this Act and any

regulations and Rules issued thereunder.

(2) The competent authority shall also carry out the

functions and duties as competent authority for all purposes of the

ECSP Regulation.

PART II

AUTHORISATION REQUIREMENTS

(1)

Without prejudice to Article 18 of the ECSP

Regulation, no crowdfunding services shall be provided in Malta

unless they are provided by a legal person which is duly authorised by

the competent authority or any European regulatory authority as a

crowdfunding services provider.

(2) No legal person established in Malta shall provide, or

hold itself out as providing, crowdfunding services unless it is duly

authorised by the competent authority as a crowdfunding services

provider.

(3) Notwithstanding anything contained in any other law, a

legal person shall not require any authorisation, including a licence

under the Banking Act, any exemption or any dispensation in

connection with the provision of crowdfunding services in the

following situations

(a)

for project owners that in respect of loans

facilitated by the crowdfunding service provider accept funds

from investors; or

(b)

for investors that grant loans to project owners

facilitated by the crowdfunding service provider

Provided that this sub-article shall not apply where a

crowdfunding service provider, a project owner or an investor is

authorised as a credit institution in accordance with Article 8 of

Directive 2013/36/EU of the European Parliament and of the Council

of 26 June 2013 on access to the activity of credit institutions and the

prudential supervision of credit institutions and investment firms,

amending Directive 2002/87/EC and repealing Directives 2006/48/

EC and 2006/49/EC.

(1)

A legal person established in Malta intending to

provide crowdfunding services shall apply to the competent authority

for authorisation as a crowdfunding service provider.

(2) The application referred to in sub-article (1) shall

contain all the information set out in Article 12(2) of the ECSP

Regulation.

(3) The competent authority shall, within twenty-five (25)

working days of receipt of the application referred to in sub-article

(1), assess whether that application is complete by verifying that the

information referred to in sub-article (2) has been submitted. Where

the application is not complete, the competent authority shall set a

deadline by which the prospective crowdfunding service provider

shall provide the missing information.

(4) Where an application referred to in sub-article (1)

remains incomplete after the deadline referred to in sub-article (3),

the competent authority may refuse to review the application and, in

the event of such refusal, shall return the submitted documents to the

prospective crowdfunding service provider.

(5) Where an application referred to in sub-article (1) is

complete, the competent authority shall immediately notify the

prospective crowdfunding service provider thereof.

(6) The competent authority shall, within three (3) months

from the date of receipt of a complete application, assess whether the

prospective crowdfunding service provider complies with the

requirements set out in the ECSP Regulation, and in this Act and any

regulations and Rules issued thereunder, and shall adopt a fully

reasoned decision granting or refusing to grant authorisation as a

crowdfunding service provider

Provided that the assessment to be carried out in terms

of this sub-article shall take into account the nature, scale and

complexity of the crowdfunding services that the prospective

crowdfunding service provider intends to provide.

(7) The competent authority shall notify the prospective

crowdfunding service provider of its decision to grant or refuse to

grant authorisation as a crowdfunding service provider within three

(3) working days of the date of the said decision.

(8) In granting an authorisation under this article, the

competent authority may subject a crowdfunding service provider to

such conditions as it may deem appropriate and having granted such

an authorisation, it may, from time to time, vary or revoke any

condition so imposed or impose new conditions.

(9) The competent authority shall establish a register of all

holders of an authorisation as a crowdfunding service provider which

shall be publicly available. This register shall also specify the

crowdfunding services which every crowdfunding service provider is

authorised to provide and shall be updated on a regular basis.

(1)

An authorisation as a crowdfunding service

provider granted by the competent authority in terms of article 6 shall

specify the crowdfunding services which the crowdfunding service

provider is authorised to provide.

(2) A crowdfunding service provider intending to extend its

business to additional crowdfunding services not foreseen at the time

of the authorisation granted to it under article 6 shall submit a request

for the extension of its authorisation to the competent authority by

complementing and updating the information referred to in article

6(2)

Provided that a request for the extension of an

authorisation made in terms of this sub-article shall be processed in

accordance with Article 12(4) to (11) of the ECSP Regulation.

(1)

The competent authority may refuse to grant

authorisation as a crowdfunding service provider if there are

objective and demonstrable grounds for believing that the

management body of the prospective crowdfunding service provider

may pose a threat to its effective, sound and prudent management and

business continuity, and to the adequate consideration of the interest

of its clients and the integrity of the market.

(2) Without prejudice to sub-article (1), the competent

authority shall not grant an authorisation as a crowdfunding service

provider unless

(a)

it is satisfied that the applicant complies with the

requirements set out in the ECSP Regulation, and in this Act

and any regulations and Rules issued thereunder;

(b)

it is satisfied that the applicant and its qualifying

shareholders, members, directors and officers are fit and

proper persons to provide crowdfunding services;

(c)

without prejudice to paragraph (b), it is satisfied

that the members of the management body of the applicant are

of sufficiently good repute, possess sufficient knowledge,

skills and experience and commit sufficient time to perform

their functions as such with the applicant; and

(d)

the applicant has its registered office and, or its

head office in Malta.

(1)

The competent authority may at any time

withdraw an authorisation granted under article 6 if

(a)

the crowdfunding service provider has not used

its authorisation within eighteen (18) months of the date of

granting of the authorisation;

(b)

the crowdfunding service provider has expressly

renounced its authorisation;

CROWDFUNDING SERVICE PROVIDERS

(c)

the crowdfunding service provider has not

provided crowdfunding services for nine (9) successive

months and is also no longer involved in the administration of

existing contracts that are the result of initial matching of

business funding interests through the use of its crowdfunding

platform;

(d)

the crowdfunding service provider has obtained

its authorisation by irregular means, including making false

statements in its application for authorisation;

(e)

the crowdfunding service provider no longer

meets the conditions under which the authorisation was

granted or in any other circumstances where the competent

authority would have been precluded from issuing an

authorisation, or entitled to refuse to grant such authorisation,

under the ECSP Regulation or this Act;

(f)

the crowdfunding service provider has seriously

infringed any provisions of the ECSP Regulation, this Act and,

or any regulations or Rules issued thereunder;

(g)

the competent authority has been furnished by or

on behalf of the crowdfunding service provider with

information which is false, inaccurate or misleading;

(h)

the competent authority considers it desirable to

withdraw the authorisation of the crowdfunding service

provider for the protection of investors and the general public,

and the reputation of Malta taking into account Malta’s

international commitments; and, or

(i)

the crowdfunding service provider is either

declared bankrupt, or goes into liquidation, or makes a

composition with its creditors, or is otherwise dissolved.

(2) Without prejudice to sub-article (1), the competent

authority may at any time withdraw an authorisation granted under

article 6

(a)

where the crowdfunding service provider is also

a payment service provider as defined in article 2(1) of the

Financial Institutions Act and it, or its managers, employees or

third parties acting on its behalf, have infringed the provisions

of Directive (EU) 2015/849 of the European Parliament and of

the Council of 20 May 2015 on the prevention of the use of the

financial system for the purposes of money laundering or

terrorist financing, amending Regulation (EU) No 648/2012 of

the European Parliament and of the Council, and repealing

Directive 2005/60/EC of the European Parliament and of the

Council and Commission Directive 2006/70/EC, as transposed

in national law, in respect of money laundering or terrorist

financing; or

(b)

where the crowdfunding service provider or a

third party acting on its behalf has its licence allowing for the

provision of payment services as defined in article 2(1) of the

Financial Institutions Act or investment services as defined in

article 2(1) of the Investment Services Act has been withdrawn

or cancelled, as applicable, and that crowdfunding service

provider or third party has failed to remedy the situation within

forty (40) calendar days.

(1)

Where the competent authority proposes to

(a)

refuse an application for authorisation as a

crowdfunding service provider or to withdraw the

authorisation of a crowdfunding service provider; or

(b)

vary any condition to which the licence is

subject or to impose a condition thereon,

it shall give the prospective crowdfunding service provider or the

crowdfunding service provider, as applicable, notice in writing of its

intention to do so, while setting out the reasons for the decision it

proposes to take.

(2) Every notice given under sub-article (1) shall state that

the recipient of the notice may, within such reasonable period after

the service thereof as may be stated in the notice, make

representations in writing to the competent authority giving reasons

why the proposed decision should not be taken, and the competent

authority shall consider any representation so made before arriving at

a final decision.

(3) Subject to the provisions of article 6, the competent

authority shall as soon as practicable notify its final decision in

writing to any of the persons to whom notice is to be given under sub-

article (1).

(1)

Where a crowdfunding service provider

authorised under this Act intends to provide crowdfunding services in

a Member State or EEA State other than Malta, it shall submit to the

competent authority the following information

(a)

a list of the Member States and, or EEA States in

which the crowdfunding service provider intends to provide

crowdfunding services;

(b)

the identity of the natural and legal persons

responsible for the provision of the crowdfunding services in

those Member States and, or EEA States;

(c)

the starting date of the intended provision of the

crowdfunding services by the crowdfunding service provider;

and

(d)

a list of any other activities provided by the

crowdfunding service provider not covered by the ECSP

Regulation.

(2) The competent authority shall, within ten (10) working

days of receipt of the information referred to in sub-article (1),

communicate that information to the European regulatory authority

of the Member States and, or EEA States in which the crowdfunding

service provider intends to provide crowdfunding services as referred

to in sub-article (1).

(3) The competent authority shall thereafter inform without

delay the crowdfunding service provider of the communication

referred to in sub-article (2).

PART III

ONGOING OBLIGATIONS

A crowdfunding service provider, or any person having

responsibility for the day to day administration or management of

such crowdfunding service provider, shall provide the competent

authority with details of any changes in the information provided

under the ECSP Regulation, this Act, or any regulations or Rules

issued thereunder as soon as such crowdfunding service provider or

such person becomes aware of such changes.

(1)

The project owner or the members of its

administrative, management or supervisory bodies, as the case may

be, shall be responsible for the information to be provided in the key

investment information sheet in terms of Article 23 of the ECSP

Regulation and the translation of the said information.

(2) Without prejudice to the generality of sub-article (1), the

persons referred to in the said sub-article shall ensure that

(a)

the information to be provided in the key

investment information sheet is not false, misleading or

inaccurate; and

(b)

the key investment information sheet does not

omit key information needed to aid investors when

considering whether to finance the crowdfunding project.

(1)

The crowdfunding service provider shall be

responsible for the information to be provided in the key investment

information sheet at platform level in terms of Article 24 of the ECSP

Regulation and the translation of the said information.

(2) Without prejudice to the generality of sub-article (1), the

persons referred to in the said sub-article shall ensure that

(a)

the information to be provided in the key

investment information sheet is not false, misleading or

inaccurate; and

(b)

the key investment information sheet at platform

level does not omit key information needed to aid investors

when considering whether to invest through individual

portfolio management of loans.

Where a crowdfunding service provider disseminates, in

terms of Article 27 of the ECSP Regulation, marketing

communications about its services, it shall comply with relevant

requirements as may be specified in Rules issued for these purposes.

PART IV

REGULATORY AND INVESTIGATORY POWERS

(1)

The Minister, acting on the advice of the

competent authority, may make regulations to give effect to the

provisions of this Act, and without prejudice to the generality of the

foregoing may, by such regulations, in particular, do any of the

following

(a)

provide for and regulate the payment by any

person or body, as the case may be, of authorisation or other

fees and such other charges payable to the competent authority

in respect of any matter provided for, by or under this Act or

any regulations made under this article, as may be prescribed;

(b)

exempt any person, service or activity from any

one or more of the provisions of this Act, subject to such

variations, additions, adaptations and modifications as may be

prescribed and subject to such conditions or other

requirements, including other forms of authorisation and

notification procedures, as may be prescribed;

(c)

transpose, implement and give effect to the

provisions and requirements of the ECSP Regulation;

(d)

transpose, implement and give effect to the

provisions and requirements of European Union Directives,

European Union Regulations and any other legislative

measures of the European Union requiring transposition and,

or implementation, as they may be amended from time to time,

including any implementing measures that have been or may

be issued thereunder and relating to authorised persons and

others as may be specified therein; regulations made under this

paragraph, and strictly related to transposition or

CROWDFUNDING SERVICE PROVIDERS

implementation as aforesaid, may provide that any provision

of this Act or of any other law shall not apply to matters falling

under the regulations, and that in so far as any of the

provisions of the regulations are inconsistent with the

provisions of this Act or of any other law, such provisions in

any such regulations shall prevail;

(e)

assign powers and functions to the competent

authority for the purposes of this Act;

(f)

to provide for the exercise of powers and the

performance of functions assigned to the competent authority

under this Act;

(g)

provide for any matter relating to the operation

of a contingency fund which may be established by a

crowdfunding service provider for its activity related to the

individual portfolio management of loans;

(h)

prescribe anything that is to be or which may be

prescribed;

(i)

provide for and regulate the payment by any

person of authorisation or other fees and such other charges

payable to the competent authority in respect of any matter

provided for, by or under the ECSP Regulation, this Act or any

regulations made or Rules issued thereunder, including the

fees and charges in respect of any permission, licence,

authorisation, exemption or other benefit, as well as any fees

and charges in respect of the competent authority’s regulatory,

supervisory or investigative functions under the ECSP

Regulation, this Act or any regulations made or Rules issued

thereunder, as may be prescribed;

(j)

provide for the establishment and imposition of

administrative penalties and other administrative measures on

crowdfunding service providers or others as may be specified

therein;

(k)

prescribe that a breach of any regulations made

under this Act may amount to a criminal offence as may be

specified, and such regulations may impose punishments in

respect of any breach, consisting of a fine (multa) not

exceeding five hundred thousand euro (€500,000) or

imprisonment for a term not exceeding three (3) years or both

such fine and imprisonment in the case of a natural person; and

a fine (multa) not exceeding eight hundred thousand euro

(€800,000) in the case of a legal person; and a higher fine

(multa) may be imposed on such natural or legal person, as the

case may be, where deemed necessary or appropriate for any

breach or failure of compliance with any EU Directive or EU

Regulation or with any regulations made under this article to

transpose or to give effect to any EU Directive or EU

Regulation; and

(l)

provide for any matter incidental to or connected

with any of the above.

(2) Regulations made under this article may be made

subject to such exemptions or conditions as may be specified therein,

may make different provisions for different cases, circumstances or

purposes and may also grant to the competent authority such powers

of adaptation of the regulations as may also be so specified.

(3) Where regulations have been made in terms of this

article, the competent authority may issue Rules for the better

carrying out of, and implementation of the provisions of the

regulations.

(4) Regulations made under this Act and any amendment or

revocation of such regulations, may be published in the English

language only.

(5) The exercise of any of the powers assigned under this

article shall be subject to any obligations or rights arising from

Malta’s international commitments.

(1)

The competent authority may, from time to time,

issue and publish Rules which shall be binding on all persons

authorised by it or falling under its regulatory or supervisory

functions and others as may be specified therein.

(2) Without prejudice to the generality of sub-article (1),

Rules issued by the competent authority may

(a)

lay down additional requirements and conditions

in relation to persons authorised by it, seeking its approval, or

falling under the regulatory or supervisory functions of the

competent authority, their activities, the conduct of their

business, their relations with customers, the public and other

parties, their responsibilities to the competent authority,

reporting requirements, financial and other resources, and

related requirements, and any other matters as the competent

authority may consider appropriate;

(b)

provide for the statements and notices that shall

be made or given for any purposes in regard to which the

competent authority exercises supervisory or regulatory

functions, and the form and contents thereof;

(c)

prescribe the information that such persons are

to submit to the competent authority;

CROWDFUNDING SERVICE PROVIDERS

(d)

transpose, implement and give effect to the

provisions and requirements of the ECSP Regulation;

(e)

transpose, implement and give effect to the

provisions and requirements of European Union Directives,

European Union Regulations and any other legislative

measures of the European Union requiring transposition and,

or implementation, as they may be amended from time to time,

including any implementing measures that have been or may

be issued thereunder and relating to authorised persons and

others as may be specified therein; and, or

(f)

regulate any matter that is incidental to or

connected with any of the matters mentioned above as the

competent authority may consider appropriate in the

performance of its functions.

(3) Rules may be made subject to such exemptions or

conditions as may be specified therein, may make different provision

for different cases, circumstances or purposes and may grant to the

competent authority such powers of adaptation of the Rules, as may

also be so specified.

(1)

Without prejudice to any other powers conferred

to it by this Act or any other law, the competent authority shall have

the following powers

(a)

to suspend a crowdfunding offer for a maximum

of ten (10) consecutive working days on any single occasion

where there are reasonable grounds for suspecting that any of

the provisions of the ECSP Regulation, this Act and any

regulations or Rules issued thereunder have been infringed;

(b)

to

prohibit

or

suspend

marketing

communications, or to require a crowdfunding service

provider or a third party designated to perform functions in

relation to the provision of crowdfunding services to cease or

suspend marketing communications, for a maximum of ten

(10) consecutive working days on any single occasion where

there are reasonable grounds for believing that any of the

provisions of the ECSP Regulation, this Act and any

regulations or Rules issued thereunder have been infringed;

(c)

to prohibit a crowdfunding offer where the

competent authority finds that any of the provisions of the

ECSP Regulation, this Act or any regulations made or Rules

issued thereunder have been infringed or where there are

reasonable grounds for suspecting that they would be infringed;

(d)

to suspend, or to require a crowdfunding service

provider to suspend, the provision of crowdfunding services

for a maximum of ten (10) consecutive working days on any

single occasion where there are reasonable grounds for

believing that any of the provisions of the ECSP Regulation,

this Act and any regulations or Rules issued thereunder have

been infringed;

(e)

to prohibit the provision of crowdfunding

services where the competent authority finds that any of the

provisions of the ECSP Regulation, this Act and any

regulations or Rules issued thereunder have been infringed;

(f)

to make public the fact that a crowdfunding

service provider or a third party designated to perform

functions in relation to the provision of crowdfunding services

is failing to comply with its obligations;

(g)

to disclose, or to require a crowdfunding service

provider or a third party designated to perform functions in

relation to the provision of crowdfunding services to disclose,

all material information which may have an effect on the

provision of the crowdfunding service in order to ensure

investor protection or the smooth operation of the market;

(h)

to suspend, or to require a crowdfunding service

provider or a third party designated to perform functions in

relation to the provision of crowdfunding services to suspend,

the provision of crowdfunding services where the competent

authority considers that the crowdfunding service provider’s

situation is such that the provision of the crowdfunding service

would be detrimental to investors’ interests;

(i)

to transfer existing contracts to another

crowdfunding service provider in cases where a crowdfunding

service provider’s authorisation is withdrawn in accordance

with article 9(1)(c), subject to the agreement of the clients and

the receiving crowdfunding service provider

Provided that the crowdfunding service provider

to which the existing contracts are transferred in accordance

with this paragraph shall be authorised by the competent

authority to provide crowdfunding services; and, or

(j)

to make an application to the court for the

dissolution and winding up by the court of a crowdfunding

service provider where it appears to the competent authority

that a crowdfunding service provider should be dissolved and

wound up by the court for the reason set out in article

214(2)(b)(iii) of the Companies Act, and where the court

accedes to the application the relevant provisions of the

Companies Act in relation to the dissolution and winding up

by the court and any other applicable provisions of any other

CROWDFUNDING SERVICE PROVIDERS

law shall apply.

(2) Any measures adopted in exercise of the powers of the

competent authority under this article shall be proportionate, duly

justified and taken in accordance with article 24.

(1)

The competent authority may, by notice in

writing, require

(i)

any person who is or was providing, or who

appears to be or to have been providing crowdfunding

services, and third parties designated to perform functions in

relation to the provision of crowdfunding services, and the

natural or legal persons that control them or are controlled by

them;

(ii)

the auditors and managers of crowdfunding

service providers and third parties designated to perform

functions in relation to the provision of crowdfunding

services; and, or

(iii)

any other person who appears to be in possession

of relevant information,

to do all or any of the following

(a)

to furnish to the competent authority, at such

time and place and in such form as it may specify, such

information and documentation as it may require, including

the power to require existing telephone and existing data

traffic records;

(b)

to furnish to the competent authority any

information or documentation as it may require verified in

such manner as it may specify;

(c)

to attend before the competent authority, or

before a person appointed by it, at such time and place as it

may specify, to answer questions and provide such information

and documentation as it may require;

(d)

to give the competent authority any assistance

which it may require and which that person is reasonably able

to give.

(2) A natural or legal person making the information

available to the competent authority in accordance with this article

shall not be considered to be infringing any restriction on disclosure

of information imposed by contract or by any legislative, regulatory

or administrative provision, and shall not be subject to liability of any

kind related to the provision of such information.

(3) The competent authority may take copies of any

documents furnished, provided or to which it has access under this

article.

(4) Where the person required to provide information or

documentation under this article does not have the relevant

information or documentation, he shall disclose to the competent

authority where, to the best of his knowledge, that information or

documentation is found, and the competent authority may require any

person, whether indicated as aforesaid or not, who appears to it to be

in possession of that information or documentation, to provide it.

(5) A statement made and documentation provided in

pursuance of any requirement under this article may be used in

evidence against the person making the statement or providing the

documentation as well as against any person to whom they relate.

(6) The provisions of this article shall not apply to

information or documentation which is privileged in accordance with

the provisions of article 642(1) of the Criminal Code.

(7) Where the competent authority has appointed a person

under sub-article (1)(c), such person shall, for the purposes of

carrying out his functions under his appointment, have all the powers

conferred on the competent authority by this article and a

requirement imposed by him shall be deemed to be and have the same

force and effect as a requirement of the competent authority.

(1)

The competent authority may, whenever it

deems it necessary or expedient, appoint an inspector to investigate

and report on the affairs of any persons referred to in article 19(1)(i)

to (iii).

(2)

An inspector appointed under sub-article (1)

(a)

may, if he thinks it necessary or expedient for the

purposes of an investigation, investigate the affairs of any

person mentioned in sub-article (1);

(b)

shall have and may exercise all the powers

conferred on the competent authority by article 18, and any

requirement made by him shall be deemed to be and have the

same force and effect as a requirement of the competent

authority;

(c)

may, and if so directed by the competent

authority shall, make interim reports and on the conclusion of

his investigation shall make a final report to the competent

authority.

(3) In appointing an inspector under sub-article (1), the

competent authority may direct that the investigation shall be carried

out within such time and shall be confined to such specific or general

matters as the competent authority may deem fit.

(4) For the purposes of this article, inspectors may include

an advocate, a person authorised to carry on the profession of

accountant or auditor in terms of the Accountancy Profession Act, or

a person considered by the competent authority as possessing suitable

expertise to exercise such function.

(5) The competent authority shall have the power to order

that all expenses of, and incidental to, an investigation carried out

pursuant to this article be paid by the person referred to in sub-article

(1).

(1)

Any officer, employee or agent of the competent

authority, on producing, if required, evidence of his authority, shall

have the power to enter any premises occupied by a person on whom

a notice has been served in terms of article 19 or whose affairs are

being investigated in terms of article 20, for the purpose of obtaining

therefrom the information or documents required by that notice, or

otherwise for the purpose of carrying out on-site inspections or

investigations, and of exercising any of the powers conferred by the

said articles.

(2) Where any officer, employee or agent of the competent

authority has cause to believe that if such notice as is referred to in

sub-article (1) were served, it would not be complied with or that any

documents to which it could relate would be removed, tampered with

or destroyed, such officer, employee or agent shall have the power, on

producing, if required, evidence of his authority, to enter any

premises referred to in sub-article (1) for the purpose of obtaining

therefrom any information or documents specified in the authority,

being information or documents that could have been required under

such notice as is referred to in sub-article (1).

(3) For the purposes of any action taken under the

provisions of this article, the competent authority may request the

assistance of the Commissioner of Police, who may for such purpose

exercise such powers as are vested in him by law.

(1)

Without prejudice to any other powers conferred

to it by this Act or any other law, the competent authority may,

whenever it deems it necessary, give by notice in writing, such

directives as it may deem appropriate in the circumstances; and any

person to whom, or to which the notice is given shall obey, comply

with and otherwise give effect to any such directive within the time

and in the manner stated in the directive or subsequent directives

Provided that the competent authority may give any

such directive even where a licence holder, for whatever reason,

ceases to hold a licence granted in terms of this Act

Provided further that any directive given in terms of this

article shall, unless the competent authority otherwise directs,

continue to apply even when a licence holder, for whatever reason,

ceases to hold a licence granted in terms of this Act.

(2) The power to issue directives under this article shall also

include the power to vary, alter, add to or withdraw any directive, as

well as the power to issue subsequent new directives.

(3) Where the competent authority is satisfied that the

circumstances so warrant, it may at any time make public any

directive it has given in accordance with this article.

(1)

The competent authority may impose

administrative penalties and other administrative measures as

mentioned in sub-article (2), where it considers that

(a)

a person’s conduct amounts to an infringement

of any of the provisions of the ECSP Regulation, this Act or

any regulations or Rules issued thereunder; or

(b)

a person has contravened or failed to comply

with any condition, obligation, requirement or directives made

or given by the competent authority under any of the

provisions of the ECSP Regulation, this Act or any regulations

or Rules issued thereunder, including failure to co-operate

with an investigation or an inspection or any request made by

the competent authority under article 19.

(2) The competent authority shall have the power to impose

the following administrative penalties and other administrative

measures for the infringements indicated in sub-article (1)

(a)

a public statement indicating the natural or legal

person responsible for the infringement, and the nature of such

infringement;

(b)

an order requiring the natural or legal person to

cease the conduct constituting the infringement and to desist

from a repetition of that conduct;

(c)

a ban preventing any member of the

management body of the legal person responsible for the

infringement, or any other natural person held responsible for

the infringement, from exercising management functions in

crowdfunding service providers;

(d)

administrative penalties which shall not exceed

twice the amount of the benefit derived from the infringement

where that benefit can be determined, even if it exceeds the

maximum amounts set out in paragraph (e);

CROWDFUNDING SERVICE PROVIDERS

(e)

in the case of a legal person, administrative

penalties which shall not exceed five hundred thousand euro

(€500,000), or of up to five per centum (5%) of the total

annual turnover of that legal person according to the last

available financial statements approved by the management

body

Provided that where the legal person is a parent

undertaking or a subsidiary of a parent undertaking which is

required to prepare consolidated financial statements in

accordance with Directive 2013/34/EU of the European

Parliament and of the Council of 26 June 2013 on the annual

financial statements, consolidated financial statements and

related reports of certain types of undertakings, amending

Directive 2006/43/EC of the European Parliament and of the

Council and repealing Council Directives 78/660/EEC and 83/

349/EEC, the relevant total annual turnover shall be the total

annual turnover or the corresponding type of income in

accordance with the relevant Union law in the area of

accounting according to the last available consolidated

financial statements approved by the management body of the

ultimate parent undertaking;

(f)

in the case of a natural person, administrative

penalties which shall not exceed five hundred thousand euro

(€500,000).

(3) Administrative penalties that may be imposed by the

competent authority in accordance with this article, may be imposed

in the form of a fixed penalty, a daily penalty, or both.

(4) Administrative penalties and other administrative

measures taken by the competent authority in terms of this article

shall be effective, proportionate, dissuasive and duly justified.

(5) The provisions of article 16(4) of the Malta Financial

Services Authority Act shall apply mutatis mutandis with respect to

any administrative penalty imposed by the competent authority under

this article.

(6) Without prejudice to the provisions of this article, where

obligations imposed in terms of the ECSP Regulation, this Act or any

regulations or Rules issued thereunder, apply to a legal person, in the

event of an infringement of any provision thereof, administrative

penalties and other measures may also be imposed, subject to the

conditions laid down in national law, on the members of the

administrative, management or supervisory bodies of the legal entity

concerned, and on other individuals who are responsible for the

infringement under national law.

(7)

The imposition by the competent authority of an

administrative penalty or any other administrative measure in terms

of this article shall be without prejudice to any other consequence

emanating from the act or omission of the offender in terms of civil

or criminal law

Provided that in all cases where the competent authority

imposes an administrative penalty in respect of anything done or

omitted to be done by any person, and such act or omission also

constitutes a criminal offence, no proceedings may be taken or

continued against the said person in respect of such criminal offence.

In the case of administrative penalties or other measures

imposed by the competent authority in accordance with the

provisions of this Act, the competent authority shall take into account

the extent to which the infringement is intentional or results from

negligence and all other relevant circumstances, including, where

appropriate

(a)

the gravity and the duration of the infringement;

(b)

the degree of responsibility of the natural or

legal person responsible for the infringement;

(c)

the financial strength of the natural or legal

person responsible for the infringement, as indicated by the

total turnover of the responsible legal person or the annual

income and net assets of the responsible natural person;

(d)

the importance of profits gained or losses

avoided by the natural or legal person responsible for the

infringement, insofar as these can be determined;

(e)

the losses for third parties caused by the

infringement, insofar as these can be determined;

(f)

the level of cooperation of the natural or legal

person responsible for the infringement with the competent

authority, without prejudice to the need to ensure

disgorgement of profits gained or losses avoided by that

person;

(g)

previous infringements by the natural or legal

person responsible for the infringement; and

(h)

the impact of the infringement on investors’

interests.

(1)

If the competent authority proposes to impose an

administrative penalty or any other measure on any person under

article 23, it shall give such person a notice in writing of its intention

to do so, setting out the reasons for the decision it proposes to take.

(2) Every notice given under sub-article (1) shall specify

that the recipient of the notice may, within such reasonable period

after the service thereof, as may be specified in the notice, make

representations in writing to the competent authority giving reasons

why the proposed decision should not be taken, and the competent

authority shall consider any representation so made before arriving at

a final decision.

(3) The competent authority shall as soon as practicable,

notify its final decision in writing to any person to whom notice is to

be given under sub-article (1).

(1)

The competent authority shall publish any

decision imposing an administrative penalty or any other measure, in

accordance with the provisions of the ECSP Regulation, this Act or

any regulations or Rules issued thereunder, on its website

immediately after the person subject to that decision has been

informed of that decision.

(2) The information published pursuant to sub-article (1)

shall specify the type and nature of the breach, the identity of the

person subject to the decision and any other information which the

competent authority deems relevant.

(3) The provisions of sub-articles (1) and (2) shall not apply

to decisions of the competent authority imposing measures that are of

an investigatory nature.

(4) Where the competent authority considers, following a

case-by-case assessment, that the publication of the identity of the

legal person subject to the decision, or the identity or personal data of

a natural person, would be disproportionate, or where such

publication may jeopardise an ongoing investigation, the competent

authority shall

(a)

defer the publication of the decision to impose a

penalty or a measure until the moment where the reasons for

non publication cease to exist;

(b)

publish the decision to impose a penalty or a

measure on an anonymous basis in a manner which is in

conformity with national law, where such anonymous

publication ensures an effective protection of the personal data

concerned

Provided that, in this case, the publication of the

relevant data may be deferred for a reasonable period where it

is foreseen that within that period the reasons for anonymous

publication shall cease to exist;

(c)

not publish the decision to impose a penalty or

measure in the event that the options laid down in paragraphs

(a) and (b) are considered to be insufficient to ensure the

proportionality of the publication of such a decision with

regard to measures which are deemed to be of a minor nature.

(5) Where the decision is subject to an appeal before a

national judicial, administrative or other authority, the competent

authority shall also publish immediately on its website such

information and any subsequent information on the outcome of such

an appeal. Any decision annulling a decision of the competent

authority to impose an administrative penalty or any other

administrative measure shall also be published.

(6) Any decision that is published in accordance with this

article shall remain accessible on the website of the competent

authority for a period of at least five (5) years after its publication

Provided that personal data contained in any such

decision shall be retained on the website of the competent authority

only for the period which is necessary, in accordance with the

applicable data protection legislation.

PART V

COOPERATION WITH OTHER AUTHORITIES

(1)

The competent authority shall act as the contact

point in terms of and for the purposes of Article 29(2) of the ECSP

Regulation.

(2) The competent authority shall cooperate with other

European regulatory authorities whenever necessary for the purpose

of carrying out its duties and exercising its powers under the ECSP

Regulation. It shall render the necessary assistance to other European

regulatory authorities, in particular by exchanging information and

cooperating in any investigatory, supervisory or enforcement activity.

(3) A European regulatory authority may request

information from the competent authority, in which case the

competent authority shall, without undue delay, provide the requested

information required for the purposes of the ECSP Regulation

Provided that if the competent authority is not able to

supply the required information immediately, it shall notify the

requesting European regulatory authority of the reasons.

(4) A European regulatory authority may request the

cooperation of the competent authority in carrying out its supervisory

functions or for an on-site verification or in an investigation, in which

case the competent authority shall, within the framework of its

powers

(a)

carry out the on-site inspection or investigation

itself;

(b)

allow the European regulatory authority which

submitted the request to participate in an on-site inspection or

investigation;

(c)

allow the European regulatory authority which

submitted the request to carry out the on-site inspection or

investigation itself;

(d)

appoint auditors or experts to carry out the on-

site inspection or investigation; or

(e)

share specific tasks related to supervisory

activities with other competent authorities.

(5) Notwithstanding the foregoing provisions, the

competent authority may refuse to act on a request for information or

a request to cooperate with an investigation made by a European

regulatory authority in any of the following circumstances

(a)

where complying with the request is likely to

adversely affect its own investigation, enforcement activities

or a criminal investigation;

(b)

where judicial proceedings have already been

initiated in respect of the same actions and against the same

natural or legal persons before the authorities of Malta; or

(c)

where a final judgment has already been

delivered in relation to such natural or legal persons for the

same actions in Malta.

(6) Where the competent authority finds that any of the

requirements under the ECSP Regulation have not been satisfied or

has reason to believe that to be the case, it shall inform the European

regulatory authority of the entity or entities suspected of such

infringement of its findings in a detailed manner.

(1)

Where a crowdfunding service provider provides

crowdfunding services in Malta, the competent authority shall, where

it has clear and demonstrable grounds for believing that irregularities

have been committed by the crowdfunding service provider or by

third parties designated to perform functions in relation to the

provision of crowdfunding services or that the crowdfunding service

provider or third parties have infringed their obligations under the

ECSP Regulation, notify the European regulatory authority which

granted authorisation to the crowdfunding service provider and

ESMA of such irregularities or infringements.

(2) Where, despite the measures taken by the European

regulatory authority referred to in sub-article (1), the crowdfunding

service provider or third party designated to perform functions in

relation to the provision of crowdfunding services persists in

infringing the ECSP Regulation, the competent authority shall, after

informing the said European regulatory authority and ESMA, take all

appropriate measures in order to protect investors and shall inform

the European Commission and ESMA of such measures without

undue delay.

(1)

The competent authority shall cooperate with

ESMA for the purposes of the ECSP Regulation in accordance with

Regulation (EU) No 1095/2010.

(2) In the case of an on-site inspection or investigation with

cross-border effect, the competent authority may request ESMA to

coordinate the inspection or investigation, as the case may be.

(3) The competent authority shall without delay provide

ESMA with all information necessary to carry out its duties, in

accordance with Article 35 of Regulation (EU) No 1095/2010.

Where a crowdfunding service provider engages in

activities other than crowdfunding services, the competent authority

shall cooperate with the authorities responsible for overseeing such

other activities as provided for in the relevant European Union

legislation or national law, as applicable.

PART VI

APPEALS, SANCTIONS AND CONFIDENTIALITY

(1)

In this article the Financial Services Tribunal

means the Tribunal established under article 21 of the Malta

Financial Services Authority Act.

(2) Any person who is aggrieved by a decision of the

competent authority under the ECSP Regulation or this Act, or any

regulations or Rules issued thereunder, may appeal against such

decision to the Tribunal within such period and under such conditions

as are established under article 21 of the Malta Financial Services

Authority Act.

(3) Without prejudice to sub-article (2), any person who is

aggrieved by the competent authority’s failure to take a decision in

respect of an application for authorisation to act as a crowdfunding

service provider which contains all the information required under

the provisions in force within six (6) months of its submission, may

appeal against such failure to decide to the Tribunal within such

period and under such conditions as are established in terms of article

21 of the Malta Financial Services Authority Act.

(4) An appeal against a decision of the competent authority

shall not suspend the operation of that decision

Provided that a decision of the competent authority to

withdraw the authorisation of a crowdfunding service provider shall

not become operative until the expiration of the period within which

an appeal lies under this article and, if an appeal is filed within such

period, the decision shall become operative on the date of the

decision of the Tribunal dismissing the appeal or on the date on

which the appeal is abandoned.

(5) Subject to the provisions of this article, the provisions of

article 21 of the Malta Financial Services Authority Act shall apply

mutatis mutandis to appeals that may be brought before the Tribunal

under this article.

(1)

Any person who contravenes or fails to comply

with any of the provisions of articles 5(1), 5(2), 19(1), 19(4), 22(1) or

34(1), or of article 19(1) or 19(4) as applied by article 20, or

contravenes or fails to comply with any condition, obligation,

requirement, directive or order made or given under any of the

provisions of the ECSP Regulation or this Act, or under any

regulations made under this Act, shall be guilty of an offence.

(2) Any person who for the purposes of, or pursuant to, any

of the provisions of the ECSP Regulation, this Act or of any

regulations or Rules issued thereunder, or any condition, obligation,

requirement, directive or order made or given as aforesaid, furnishes

information or makes a statement which he knows to be inaccurate,

false or misleading in any material respect, or recklessly furnishes

information or makes a statement which is inaccurate, false or

misleading in any material respect, shall be guilty of an offence.

(3) Any person who is knowingly a party to the provision of

any crowdfunding service with a fraudulent intent or for a fraudulent

purpose, shall be guilty of an offence.

(4) Any person who with intent to avoid detection of the

commission of an offence under this Act removes, destroys, conceals

or fraudulently alters any book, document or other paper, shall be

guilty of an offence.

(5) Any person who intentionally obstructs a person

exercising rights or powers conferred by this Act shall be guilty of an

offence.

(6) The provisions of this Act or any regulations issued

thereunder shall not affect any criminal proceedings that may be

competent under any other law.

(7)

The competent authority shall have the power to

(a)

liaise with the Commissioner of Police to receive

specific

information

related

to

criminal

investigations or proceedings commenced for

breaches of the ECSP Regulation, this Act or any

regulations made or Rules issued thereunder. The

Commissioner of Police shall cooperate with the

competent authority, thereby providing such

specific information related to any criminal

investigations or proceedings commenced in

relation to such breaches; and

(b)

provide such information received in accordance

with paragraph (a), and transmit copies of acts and

documents of the courts of criminal justice in

accordance with the second proviso to article 518

of the Criminal Code, to other authorities which are

deemed competent authorities for the purposes of

Article 29 of the ECSP Regulation, as well as to

ESMA, for the purpose of fulfilling its obligations

to cooperate for the purposes of the ECSP

Regulation, this Act and any regulations made and

Rules issued thereunder.

(1)

A natural person guilty of an offence under the

provisions of article 32 shall be liable on conviction to a fine (multa)

not exceeding five hundred thousand euro (€500,000) or to a term of

imprisonment not exceeding three (3) years, or to both such fine and

imprisonment, unless such fine or term of imprisonment is otherwise

imposed in regulations made under article 16(1)(k).

(2) A legal person guilty of an offence under the provisions

of article 31 shall be liable on conviction to a fine (multa) not

exceeding eight hundred thousand euro (€800,000), unless such fine

is otherwise imposed in regulations made under article 16(1)(k).

(1)

Information obtained by the competent authority

or by its officers, employees or agents, whether current or former, or

by inspectors, auditors and experts formerly or currently engaged by

the competent authority for the purposes of, or pursuant to, any of the

provisions of the ECSP Regulation, this Act, or of any regulations or

Rules issued thereunder, or in the discharge of any functions under

any of the said provisions, or by any other person who works or has

worked for the competent authority or for any third party to whom the

competent authority has delegated any of its functions or powers,

shall be treated as confidential and protected by the duty of

professional secrecy, and shall not be disclosed to any other person,

except in the following cases

(a)

where the authority, body or person

communicating information to the competent authority

consents thereto;

(b)

where the disclosure of the information is

CROWDFUNDING SERVICE PROVIDERS

necessary for any legal proceedings;

(c)

where the information is provided to such other

local or European or overseas regulatory, judicial or

enforcement authorities in the pursuance of serious concerns

of a regulatory or criminal nature; and, or

(d)

where the disclosure of the information is

permitted or required by European Union legislation or

national law.

(2)

The information referred to in sub-article (1) shall include

all information exchanged between the competent authority and

European regulatory authorities under the ECSP Regulation that

concerns business or operational conditions and other economic or

personal affairs.