18 August 2017
Find out more

FCA to re-write the rule book on crowdfunding

09 December 2016  |  13149 views  |  0 Crowd silhouette inside building

The Financial Conduct Authority is preparing to crackdown on lax practices in the UK's booming crowdfunding industry after raising concerns about misleading and complex marketing and inadequate provisions for winding down when a platform goes belly-up.

The UK watchdog says it plans to modify some rules applying to the £3.4 billion UK market after uncovering worrying lapses in good business practice by loan-based and investment-based crowdfunding firms seeking full authorisation.

The FCA’s current rules came into force in April 2014. A post-implementation review of the market was kicked off in July this year.

The FCA says it found "unclear and complex" product offerings make it difficult for investors to run comparisons with alternative asset classes or assess the risks and returns of investing on a platform. It has also found that financial promotions run by firms do not always meet requirements to be ‘clear, fair and not misleading’. Furthermore, the arcane structure of some companies in the market introduces operational risks and conflicts of interest that are not being managed sufficiently.

In the loan-based market, the fissures run deeper, with the FCA expressing concern that "certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors."

The regulator says it has challenged some firms to improve their client money handling standards and to re-assess plans for wind-down to ensure the successful run-off of loan books to maturity.

The findings are likely to lead to a tightening of the rules governing crowdfunding and a far more prescriptive compliance regime.

Andrew Bailey, Chief Executive of the FCA, says: “Our focus is ensuring that investor protections are appropriate for the risks in the crowdfunding sector while continuing to promote effective competition in the interests of consumers. Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas. We plan to consult next year on new rules to address the issues we have identified.”

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

Former HSBC/Citigroup executive joins Crowdcube as chairman

Former HSBC/Citigroup executive joins Crowdcube as chairman

12 October 2016  |  4283 views  |  0 comments | 3 tweets | 2 linkedin
Santander partners Crowdfunder to back UK community projects

Santander partners Crowdfunder to back UK community projects

04 October 2016  |  4564 views  |  0 comments | 5 tweets | 3 linkedin
Fintech's success raise questions about EU's crowdfunding limits

Fintech's success raise questions about EU's crowdfunding limits

07 June 2016  |  8777 views  |  0 comments | 27 tweets | 12 linkedin
UK Treasury Committee calls for further scrutiny of P2P market

UK Treasury Committee calls for further scrutiny of P2P market

02 June 2016  |  7681 views  |  0 comments | 14 tweets | 10 linkedin
Nordea to launch crowdfunding platform

Nordea to launch crowdfunding platform

11 May 2016  |  7829 views  |  0 comments | 6 tweets | 7 linkedin
Crowdfunding market to hit $34.4 billion in 2015

Crowdfunding market to hit $34.4 billion in 2015

01 April 2015  |  12564 views  |  0 comments | 23 tweets | 13 linkedin
FCA sets out P2P lending and crowdfunding rules

FCA sets out P2P lending and crowdfunding rules

06 March 2014  |  6270 views  |  0 comments | 5 tweets | 13 linkedin
SEC proposes new crowdfunding rules; FCA begins consultation

SEC proposes new crowdfunding rules; FCA begins consultation

24 October 2013  |  5032 views  |  0 comments | 4 tweets | 3 linkedin

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.worldpaymentsreport.comdownload the paper nowvisit www.dorsum.eu

Top topics

Most viewed Most shared
Monzo appoints Curve co-founder Foster-Carter COOMonzo appoints Curve co-founder Foster-Car...
8641 views comments | 1 tweets | 3 linkedin
Norwegian banks and startups form fintech clusterNorwegian banks and startups form fintech...
7020 views comments | 18 tweets | 22 linkedin
Mobile contactless spending accelerating in UKMobile contactless spending accelerating i...
6557 views comments | 20 tweets | 22 linkedin
hands typing furiouslyWhy Blockchain Might Not Be The Future For...
5816 views 1 | 5 tweets | 3 linkedin

Featured job

£100-120K Basic dependent on experience plus subst...
London

Find your next job