More protection for investors
Watchdog orders tightening of crowdfunding
The Financial Conduct Authority will force crowdfunding and peer-to-peer lending platforms to comply with the same rules as major lenders on mortgage lending, restrict cross-platform investment and make them produce clear plans for winding down.
Following a public consultation exercise the FCA said it was concerned consumers find it hard to compare platforms, while some promotions need to be made clearer.
It warned the complex structures of some firms introduce “operation risks and/or conflicts of interest”, while some platforms encouraged consumers to get into risks they did not fully understand.
Forcing the sector to behave more like banks will provide “adequate investor protection while allowing for innovation and growth in the market”.
It said: “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.”
Andrew Bailey, the FCA’s chief executive, 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.”