The Financial Conduct Authority is updating its loan-based crowdfunding rules in the face of growing complexity and poor practices since it first authorised trading in the market 18 months ago.
The watchdog is proposing a number of modifications to its rulebook to stabilise the market and provide better consumer protection.
The new rules cover:
- Proposals to ensure investors receive clear and accurate information about a potential investment and understand the risks involved
- Ensure investors are adequately remunerated for the risk they are taking
- Transparent and robust systems for assessing the risk, value and price of loans, and fair/transparent charges to investors
- Promote good governance and orderly business practices
- Proposals to extend existing marketing restrictions for investment-based crowdfunding platforms to loan-based platforms.
In the use of alternative finance platforms for home loans, the FCA is also proposing to tighten provisions, applying rules which would normally be stipulated for home finance providers to P2P platforms where at least one of the investors is not an authorised home finance provider.
Christopher Woolard, executive director of strategy and competition at the FCA says: “We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up to date as markets develop. The changes we’re proposing are about ensuring sustainable development of the market and appropriate consumer protections.”
The FCA is asking for responses to this consultation by 27 October 2018 before publishing rules in a Policy Statement later this year.