How to obtain authorisation?
Obtaining authorisation is a regulated process whereby you can become a participant of Latvia's financial market and commence business after obtaining authorisation.
Crowdfunding services may be provided by a legal persona who has obtained authorisation granted by Latvijas Banka in accordance with Regulation No 2020/1503.
Crowdfunding is a form of alternative finance for start-ups and small and medium-sized enterprises. Crowdfunding is an important intermediary when a crowdfunding service provider, without taking own risk, leads a digital platform available to the public to bring potential investors or lenders together with enterprises seeking financing. Such financing may take the form of loans or investments in the capital of an enterprise.
Three types of participants are involved in the provision of crowdfunding services:
- the project owner proposing the project to be financed,
- the investors financing the proposed project,
- the crowdfunding service provider bringing together the project owners and investors on the online platform.
Qualification requirements for the crowdfunding service provider:
- persons involved in the management have adequate education and experience to manage the crowdfunding service provider;
- persons involved in the management and in the case of shareholders holding 20% or more of their share capital or voting rights with good repute and no criminal record in accordance with the requirements of the paragraph 3 of Article 12 of Regulation No 2020/1503;
- provision of own funds of at least 25 000 euro or capital requirement (a quarter of fixed overheads in the previous year), if it is more than 25 000 euro, or insurance policy or a combination of own funds and insurance policy.
Regulation No 2020/1503 does not apply to:
- crowdfunding services provided to project owners who are consumers;
- crowdfunding offers with a total consideration exceeding 5 000 000 euro over a period of 12 months. In excess of the limits specified, a financing offer must be organised in accordance with the requirements of the Financial Instruments Market Law;
- commercial activities related to the marketing of credit claims issued by credit providers on web platforms. Such commercial activity must be authorised by an investment firm or credit institution. See details on licensing of other financial market participants.
The process of obtaining authorisation comprises several steps:
- Preparation for the submission of application
- Submission of application
- Assessment of application
- Receipt of authorisation
Preparation for the submission of application: an introductory stage, during which Latvijas Banka organises a meeting with an entrepreneur to discuss its planned activities. At this stage, the enterprise does not necessarily have to be established yet. What does the entrepreneur do? What does Latvijas Banka do? What should be taken into account? Documents to be submitted: Costs Preparing for submission of the application and provision of advice by Latvijas Banka are free of charge. Submission of application: An entrepreneur prepares and submits an application for authorisation. What does the entrepreneur do What does Latvijas Banka do What should be taken into account? List of documents to be submitted Requirements for the list of documents to be submitted are laid down in Article 12 of Regulation No 2020/1503 and Regulatory Technical Standards for obtaining authorisation (hereinafter – RTS). Currently, ESMA has finalised development of RTS and has published the final draft version, which is pending adoption by Europen Commission; however, please use the draft form in the Annex to the RTS, which is currently available only in English, but you may also complete it in Latvian. 1. Requirements for the list of documents to be submitted are laid down in Article 12 of Regulation No 2020/1503 and Regulatory Technical Standards for obtaining authorisation (hereinafter – RTS). Currently, ESMA has finalised development of RTS and has published the final version. Please see here: RTS 2. The application is accompanied by: 2.1. a programme of operations describing the intended types of crowdfunding services and the crowdfunding platform that it intends to operate, including where and how crowdfunding offers are to be marketed; 2.2. a description of governance arrangements and internal control mechanisms to ensure compliance with the Regulation, including risk management and accounting procedures; 2.3. a description of IT systems, resources and procedures for the control and safeguarding of the data processing systems; 2.4. a description of operational risks and the procedures for their management; 2.5. a description of prudential safeguards in accordance with Article 11 of Regulation (including financial forecasts for the following three years); 2.6. proof that prudential safeguards are met in accordance with Article 11 of Regulation; 2.7. a description of business continuity plan which, taking into account the nature, scale and complexity of the crowdfunding services, establishes measures and procedures that ensure, in the event of failure of the prospective crowdfunding service provider, the continuity of the provision of critical services related to existing investments and sound administration of agreements between the prospective crowdfunding service provider and its customers; 2.8. documents certifying the identity of the natural persons responsible for the management of the prospective crowdfunding service provider; 2.9. CV and certificate from the criminal record register on absence of a criminal record from countries where the persons for the management of the prospective crowdfunding service provider and for shareholders who hold 20 % or more of the share capital or voting rights have carried out commercial activities. In addition, provide information on the education of the persons involved in the management and proving that those persons have sufficient knowledge, skills and experience, necessary to manage the prospective crowdfunding service provider; 2.10. a description of internal rules aimed at preventing persons referred to in paragraph 2 of Article 8 of the Regulation from participating in crowdfunding services offered by project owners; 2.11. a description of procedures for outsourcing; 2.12. a description of procedures for handling customer complaints; 2.13. a description of the procedures for organising payment flows, including confirmation of whether the prospective crowdfunding service provider intends to provide payment services on its own or through a third party in accordance with Directive (EU) 2015/2366, or the procedures in accordance with paragraph 5 of Article 10 of Regulation; 2.14. a description of the procedures to verify the completeness, correctness and clarity of the information contained in the key investment information sheet; 2.15. a description of procedures in relation to investment limits for non-sophisticated investors referred to in paragraph 7 of Article 21 of Regulation. Costs 2500 euro for examining documents and information submitted for authorisation (should be paid upon official submitting of the application) Time limit for examining the application Latvijas Banka starts examining the application within 3 months from confirmation that the application is complete. The time limit for examining the application may be extended if the information provided in the application is not sufficient to take a decision on the issue of authorisation. Assessment of application: Latvijas Banka carries out the assessment of the application as to the substance. What does the entrepreneur do? What does Latvijas Bankas do? What should be taken into account? Costs No additional costs associated with the examination of documents during the assessment stage of the application are applied. Receipt of authorisation: Latvijas Banka finalises the examination of the application and takes a decision on the issue or refusal to issue authorisation. What does the entrepreneur do What does Latvijas Banka do What should be taken into account Costs No additional costs associated with obtaining authorisation during the stage of obtaining authorisation. Supervision: Latvijas Banka supervises activities of the enterprise in accordance with requirements of Regulation No 2020/1503. What does the entrepreneur do? What does Latvijas Banka do? What should be taken into account? Costs After registration in the register of crowdfunding service providers, the enterprise pays to Latvijas Banka 4000 euro per year and up to 1.4 percent (inclusive) per year of gross revenue, but not more than 100 000 euro per year.
Process of obtaining authorisation
Meeting with the prospective crowdfunding service providers
Latvijas Banka specialists offer advice to prospective market participants to help better understand the regulatory requirements on the process of registering crowdfunding services, as well as to identify potential challenges by developing new and innovative products or business models. Our specialists offer:
- Clarify certain aspects of regulatory requirements;
- Advise on the application of regulation at an early stage of development of an innovative product or business model.
Apply for advice!
Please apply in advance to agree on the meeting time: