This article is from the source 'independent' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.independent.co.uk/news/business/news/crowdfunding-peer-to-peer-lending-faces-new-rules-fca-crackdown-a7465071.html

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Watchdog announces crack down on crowdfunding and peer-to-peer lending Watchdog announces crackdown on crowdfunding and peer-to-peer lending
(about 3 hours later)
Crowdfunding firms should face a crackdown because people are unaware of the risks they pose, the UK’s financial watchdog has said.Crowdfunding firms should face a crackdown because people are unaware of the risks they pose, the UK’s financial watchdog has said.
The FCA found evidence of “potential investor detriment” and suggested peer-to-peer platforms should be governed by standards similar to those applied to mortgages. The Financial Conduct Authority found evidence of “potential investor detriment” and suggested peer-to-peer platforms should be governed by standards similar to those applied to mortgages.
Crowdfunding allows ordinary consumers to buy stakes in new start-ups, or lend to them, often through website platforms such as Kickstarter, Indiegogo or Rockethub. Crowdfunding allows ordinary consumers to buy stakes in new start-ups or lend to them, often through website platforms such as Kickstarter, Indiegogo or Rockethub.
Around one in five crowdfunded businesses fail and and only 22 per cent of investors realised a return for through a sale or exit, according to AltiFi Data. The FCA says investors are not made aware of this level of risk and said It said it consult on more regulation to protect investors in for the fast-growing sector. Around one in five crowdfunded businesses fail and and only 22 per cent of investors realised a return for through a sale or exit, according to AltiFi Data. The FCA said investors were not made aware of this level of risk and that it would consult on more regulation to protect investors in the fast-growing sector.
It found it is difficult for investors to compare platforms with each other, to assess risks and returns and financial promotions do not always meet requirements to be “clear, fair and not misleading”. It found it was difficult for investors to compare platforms with each other, to assess risks and returns and financial promotions do not always meet requirements to be “clear, fair and not misleading”.
The FCA is also concerned that there are inadequate provisions in the event a firm goes bust and cannot repay borrowings. The FCA was also concerned that there were inadequate provisions in the event that a firm went bust and could not repay borrowings.
A fresh consultation, to begin in the first quarter of 2017, will look at strengthening rules on wind-down plans, additional requirements on cross-platform investment and extending mortgage-lending standards to loan-based platforms.A fresh consultation, to begin in the first quarter of 2017, will look at strengthening rules on wind-down plans, additional requirements on cross-platform investment and extending mortgage-lending standards to loan-based platforms.
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.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.”“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.”
Some in the sector criticise the watchdog for being slow in authorising firms, but Bailey said business models were continually changing, making it more time-consuming for the regulator to vet applications. Some in the sector criticise the watchdog for being slow in authorising firms, but Mr Bailey said business models were continually changing, making it more time-consuming for the regulator to vet applications.
The FCA said its review found in both loan and investment crowdfunding that it was hard for investors to compare platforms with each other, or compare crowdfunding with other asset classes.The FCA said its review found in both loan and investment crowdfunding that it was hard for investors to compare platforms with each other, or compare crowdfunding with other asset classes.
Financial promotions were not always clear, fair and not misleading, and the “complex structures” of some firms created operational risks.Financial promotions were not always clear, fair and not misleading, and the “complex structures” of some firms created operational risks.
“It is difficult for investors to assess the risks and returns of investing on a platform,” it said.“It is difficult for investors to assess the risks and returns of investing on a platform,” it said.
The watchdog said it has “challenged” some firms to improve standards in handling customer money.The watchdog said it has “challenged” some firms to improve standards in handling customer money.
Additional reporting by agenciesAdditional reporting by agencies