Since the financial crisis, small businesses, which in Europe represent the great majority of businesses and provide the highest number of jobs, are facing increasing difficulties to get access to finance.

In this context, crowdfunding can be a possible solution. It may provide an alternative source of funds for start-ups and small businesses but it also presents several risks for investors. It allows raising money to launch a business idea by involving three main types of actors: an issuer, who has a project for which funds are needed, investors interested in participating in the financing of the project, and an online platform acting as a moderating organisation.

Investment-based crowdfunding, not to be confused with other types of crowdfunding like donation-based or rewards-based crowdfunding mechanisms, is classified in Malta under the Investment Services Act, and its ancillary rules.

Following the feedback it received from the Consultation Document on Investment-Based Crowdfunding, the Malta Financial Services Authority (MFSA) has issued the Requirements regarding applications for a licence to carry out Investment-based Crowdfunding under the Investment Services Act which add up to the current regulatory framework to specifically target platforms offering investment-based crowdfunding.



A platform providing investment-based crowdfunding services will have to apply for a licence under the Investment Services Act. To be valid, the application must contain a detailed business plan and a detailed description of the activities that the applicant for the licence plans to carry out.

Segregation of activities

If they already hold an investment services licence, applicants for investment-based crowdfunding services will have to clearly separate their current activities from the crowdfunding services.

Disclosure of information

The issuer of an instrument through a crowdfunding platform will have to disclose, in the prospectus or an information document, relevant information about its identity and its business activities as well as meaningful, comprehensive and sufficient information for the investors to make an informed investment decision. The crowdfunding platform operator must make this information available on its website and indicate that it is not responsible for the project. Investors will also have to be provided with additional information regarding the transfer of their funds to the issuer and the total amount of fees to be paid. They will be warned of the risks involved in the investment operation and that they are responsible for their investment decisions.

However, if the investor is not a professional investor, the platform operator will have to assess the investor’s investment experience, knowledge and objective and if the assessment reveals that an investor does not have enough knowledge, the platform operator must give this investor a risk warning.

Anti-Money Laundering requirements

As is the case of other investment service providers, applicants for a licence are bound to comply with Anti-Money Laundering regulations. They are required to conduct due-diligence procedures, ensure that the issuer is officially registered and solvent, that it operates in conformity with its registration documents and that the investment instruments are duly and legally issued.



Contrary to the investment services regulated by the Investment Services Act and MiFID, crowdfunding activities do not enjoy passporting possibilities to other EU Member States.

Type of instruments

Instruments to be offered cannot be complex instruments. Hence, only the following types of instruments can be offered as part of an investment-based crowdfunding procedure: shares, bonds and other debt instruments but not convertible shares, units in collective investment undertakings and instruments embedding a derivative.

Project size

A particular offer on an investment-based crowdfunding platform cannot exceed €1,000,000 over a period of 12 months and a particular issuer may only be allowed to place a project on one crowdfunding platform. The issuer will be requested to sign a declaration in which it undertakes not to use other platforms for the same project.

Amount of investment

There is also a double limit on the maximum amount that non-professional investors may invest: non-professional investors may not invest more than the lowest between €5000 and 20% of their net annual income over a period of 12 months on a specific platform.

The platform operator is responsible to verify that these restrictions are respected in line with the applicable rules.

For more information on Crowdfunding regulation, Investment Services licenses and related areas please contact Dr Cherise Abela Grech on and Mr Samuel Gandin on

Disclaimer: This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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