FCA plans to tighten rules around investment and loan crowdfunding

Continuing a busy week for UK regulator the FCA, in which it has already shaken the online trading market by introducing stricter rules for CFD trading, the FCA has given an update on the post-implementation review of the loan-based and investment-based crowdfunding market. UK watchdog’s earlier call for input raised a number of issues for discussion.

Based on a review of the feedback received, issues seen during the supervision of crowdfunding platforms currently trading and consideration of applications from firms seeking full authorisation, the FCA believes it is appropriate to modify a number of rules for the market.

Proposals for new rules to be considered in Q1 2017

FCA plans to consult on additional rules in a number of areas. These include more prescriptive requirements on the content and timing of disclosures by both loan-based and investment-based crowdfunding platforms.

For loan-based crowdfunding FCA also intends to consult on:

  •  strengthening rules on wind-down plans
  • additional requirements or restrictions on cross-platform investment
  • extending mortgage-lending standards to loan-based platforms

The FCA’s current rules on loan-based and investment-based crowdfunding platforms came into force in April 2014. They aimed to create a proportionate regulatory framework that provided adequate investor protection whilst allowing for innovation and growth in the market.

The call for input in July 2016 launched a post-implementation review of these rules. The paper summarised market developments since 2014 and some of the FCA’s emerging concerns.

Andrew Bailey, FCA

Andrew Bailey, Chief Executive of the FCA, said:

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.

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