Crowdfunding Joins the Crowd

Basic CMYKCrowdfunding has now been “legalised” in the UK. To date, British law hadn’t made provision for this concept, but as of 1 April 2014, the Financial Services Authority (FCA – formally FSA) has passed new laws to regulate the industry,even going as far as to coin terms, such as the “non-readily realisable
security”. The new rules are the Crowdfunding Investment and the Non-Readily Realisable Instruments 2014, with the following essential elements: a) Peer to Peer platforms must have at least up to 0.2% reserves or £100K to cover loans; b) Equity investments must ask their investors to self-certify that they won’t invest more than 10% of their free (non-mortgaged/home/pension) savings.

Market participants and experts are divided on the new rules., Funding Circle
co-founder James Meekings said, “the introduction of proportionate
regulation isa step-change for the industry and will cement our position
within the wider financial landscape. The FCA has shown foresight in striking
the balance between enabling the industry to continue to flourish, while
ensuring the protection of investors and borrowers.”

Charles Marquand Barrister of 4 Stone Buildings says “I’m not sure the rules go
far enough. There are still some important areas where existing private company
rules would benefit from being brought up to date”

Our view: Clarity yes is welcome,  But instead of making it more difficult
for borrowers and platforms, and those seeking finance, it should have granted
much wider exemptions to people who want to lend relatively small amounts and
avoid companies, platforms and investors getting bogged down by red tape.
In short, by letting the FCA issue rules, the government has missed a trick in
standing up for the consumer and small business.  What’s your view?

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