FCA confirms new rules for crowdfunding
The Financial Conduct Authority (FCA) has confirmed new rules for crowdfunding which, it says, will help protect consumers.
Its aim is to give people more access to “fair, clear information” when using loan-based or securities-based crowd funding platforms.
£28m was raised through crowdfunding last year – a 600 per cent increase from 2012. The FCA already regulators secuturities-based funding, which allows people yo buy shares or debt securities in a company.
Loan-based crowdfunding – mainly peer-to-peer lending – will be regulated by the FCA from April. Last year, £480m was lent by consumers to businesses and individuals, an 150 per cent increase from a year earlier.
Christopher Woolard, director of policy, risk and research at the FCA, said:
We have been careful to listen to feedback from the market and the rules provide consumer protection, whilst allowing businesses to continue to have access to this innovative method of funding.
Details on the rules from the regulator's statement:
- Access to clear information, which allows them to assess the risk and to understand who will ultimately borrow the money.
- Require firms running the loan-based platforms to have plans in place so that loan repayments continue to be collected even if the online platform gets into difficulties.
- New prudential regulations will be introduced over time so that these firms have capital to help withstand financial shocks. This is important as consumers who lend money through these firms will not be able to claim through the Financial Services Compensation Scheme.
- The new rules will provide the same level of protection to investors whether they engage with firms online, or offline as a result of the direct marketing or telephone selling.