CNMV requirements for PFP licences

CNMV requirements for PFP licences

What is a PFP licence and what is it necessary for?

A PFP is a company whose corporate purpose is to act as an intermediary between the promoters of a project and investors who wish to invest in that project. The acronym PFP stands for “Plataforma de Financiación Participativa”, i.e. a company that advertises certain projects of certain promoters through a website (the platform), explaining the investment needs of the specific project, so that users, whether natural or legal persons, can channel their savings into the investment.

These platforms are regulated by the recent Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European providers of equity finance services for companies, amending Regulation (EU) 2017/1129 and Directive (EU) 2019/1937, and by Law 5/2015 of 27 April 2015 on the promotion of business financing.

Given the role of these types of entities in channelling the savings of both qualified and non-qualified investors, the CNMV imposes a series of transparency requirements. This fact more than justifies the need for a licence to carry out this type of activity, as stated in Article 47 of the aforementioned Law: “Any entity that intends to provide equity financing services in Spain regulated by Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020, and which has not previously been authorised to provide equity financing services in another Member State of the European Union, shall apply to the CNMV for authorisation to operate as a provider of equity financing services”.

This authorisation to operate in Spanish territory must be requested from the CNMV in accordance with the requirements of the European Regulation.

Article 12 of the Regulation establishes the requirements that the application must contain in order to apply for a PFP licence, among which we highlight:

• The name, legal name, the legal form of the prospective PFP, the articles of association. 
  – A programme of activities specifying the types of services the provider plans to provide.

• A description of the future provider’s governance and internal control mechanisms.

• A description of the business continuity plan of the provider, setting out measures and procedures which, in the event of insolvency, ensure the continuity of the provision of essential services. 

• Confirmation as to whether the provider intends to provide payment services itself or through a third party in accordance with Directive 2015/2355.

• No criminal record as regards infringements of national rules in areas of commercial law.

• Evidence that the natural persons involved in the management of the prospective provider of equity financing services collectively possess sufficient knowledge, skills and experience for the management of the prospective provider of equity financing services and that such natural persons are required to devote sufficient time to the performance of their duties.

The prudential requirements are those set out in Article 11 of the Regulation itself:

1 Providers of equity financing services shall at all times hold prudential safeguards of an amount at least equal to the higher of the following:

a EUR 25 000; and

b. one quarter of the fixed overheads of the preceding financial year.

These safeguards of at least EUR 25,000 or one quarter of the fixed overheads of the previous financial year shall be taken in one of the forms set out in Art. 11.2: own resources and/or an insurance policy.

2. The prudential safeguards referred to in paragraph 1 of this Article shall take one of the following forms:

a. Own resources, consisting of Common Equity Tier 1 capital items referred to in Articles 26 to 30 of Regulation (EU) No 575/2013 of the European Parliament and of the Council (20) after deductions have been made in full, in accordance with Article 36 of that Regulation, without the application of the exemption thresholds in accordance with Articles 46 and 48 of that Regulation;

b. An insurance policy covering the territories of the Union in which the equity finance offerings are actively marketed or a comparable guarantee; or

c. A combination of points (a) and (b).

Steps to apply for a PFP licence

Given the nature of this type of company, the steps to be followed in order to obtain the required licence are eminently bureaucratic. Accordingly, applications of this type begin with a pre-notification form, a document in which the applicant company first submits its application for a licence. 

In this preliminary step, the CNMV must have sufficient information for the CNMV to know in a sui generis way what the company is going to do.

Once the pre-notification document has been confirmed, the applicant must complete a sort of manual in which it must certify compliance with all the requirements, including the aforementioned procedures and manuals.

With regard to the processing time for this authorization, as stated in Article 53.2, “the application for authorization must be resolved within three months of its receipt or the time at which the required documentation is completed and, in any case, within six months of its receipt”.

LETSLAW

LETSLAW advises and accompanies those interested in creating a PFP, so that the launch of the PFP is in accordance with the current legal framework and is a success for the project.