FCA to strengthen crowdfunding rules

FCA, Britain’s Financial Conduct Authority, believes it is appropriate to modify a number of rules for the market as to improve safety and transparency for investors, a press release announced earlier on Friday.

Andrew Bailey, Chief Executive of the British Financial Conduct Authority. (Source: Irishtimes.com)

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.

According to their findings for both loan-based and investment-based crowdfunding platforms, it is difficult for investors to compare platforms with each other or to compare crowdfunding with other asset classes due to complex and often unclear product offerings as well as it is difficult for them to assess the risks and returns of investing on a platform.

Moreover, financial promotions do not always meet the requirement to be ‘clear, fair and not misleading’ and the complex structures of some firms introduce operational risks and/or conflicts of interest that are not being managed sufficiently.

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