The Financial Conduct Authority (FCA) is the responsible regulator in the UK for loan-based crowdfunding platforms as well as investment-based crowdfunding platforms. It has set out new rules in March 2014 for these activities in its Policy Statement PS14/4 “The FCA’s regulatory approach to crowdfunding over the internet, and the promotion of non-readily realisable securities by other media”, which can be found here.
The rules the FCA has outlined in this document have come into force on 1 April 2014. In particular, the FCA is responsible for regulating:
- loan-based crowdfunding platforms, on which people lend money to individuals or businesses in the hope of a financial return in the form of interest payments and a repayment of capital over time (this excludes some business-to-business loans)
- investment-based crowdfunding platforms, on which people invest in unlisted shares or debt securities issued by businesses
Since then the regulator has conducted a review to look into the implementation of these rules and published its findings in November 2015. The full report titled “A review of the regulatory regime for crowdfunding and the promotion of non-readily realisable securities by other media” can be found here.
The review primarily focuses on the changes to the market, authorisation of firms and its process, supervision by the FCA and international action.
The FCA intends further to conduct a full post-implementation review of the rules in 2016.
HM Treasury has recently conducted a consultation on whether to include investment based crowdfunding in ISAs and has published its results here.
The response to the consultation summarises the comments received and sets out the government’s decisions on how to proceed. This includes the decision to extend the list of qualifying investments for the new Innovative Finance ISA to include debt securities offered via a crowdfunding platform and a commitment to work with the sector to continue to explore the case for including equity based crowdfunding.