P2P-Banking

FCA Publishes Interim Feedback Following a Call for Input to the Post-Implementation Review of the Rules for Crowdfunding

In August the FCA posted a call for input preceeding a planned review of the current regulation of p2p lending and crowdfunding for equity. Today the FCA publishes interim feedback. The feedback statement provides a first response to the feedback received and sets out next steps.

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.

Initial findings

Loan-based and investment-based crowdfunding

For both loan-based and investment-based crowdfunding platforms the FCA has found that, for example:

Loan-based crowdfunding

In the loan-based crowdfunding market in particular the FCA is concerned that, for example:

Proposals for new rules to be considered in Q1 2017

The 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 the FCA also intends to consult on:

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, 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.”

Further work

The FCA’s ongoing research and investigatory work should be completed early in 2017. At that stage, the FCA will complete the post-implementation review and determine whether further consultation on rule changes is needed.

(Source: FCA)

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