To ensure adequate protection for different categories of investors participating in crowdfunding projects while facilitating investment flows, Regulation 2020/1503 distinguishes between sophisticated and non-sophisticated investors and introduces differentiated levels of safeguards for investors appropriate for each category.
Sophisticated investors receive the same treatment as professional investors as defined under Directive 2014/65/EU (MiFID). Therefore, all investors can be classified as:
- Professional Investors;
- Sophisticated Investors;
- Non-sophisticated Investors.
Who are sophisticated investors?
A sophisticated investor is an investor who is aware of the risks associated with investing in capital markets and has adequate resources to bear these risks without exposing themselves to excessive financial consequences.
Sophisticated investors can be classified as such if they meet at least one of the following identification criteria:
Legal entities that meet AT LEAST ONE of the following criteria:
- Net assets of at least EUR 100,000;
- Net turnover of at least EUR 2,000,000;
- Balance sheet of at least EUR 1,000,000.
Individuals who meet AT LEAST TWO of the following criteria:
- Personal gross income of at least EUR 60,000 per tax year, or a portfolio of financial instruments, including cash deposits and financial assets, exceeding EUR 100,000;
- The investor works or has worked in the financial sector for at least one year in a professional position requiring knowledge of the intended operations or services, or the investor has held an executive position for at least 12 months in the legal entity as defined above;
- The investor has carried out significant transactions in capital markets with an average frequency of 10 transactions per quarter in the preceding four quarters.