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FCA Crowdfunding: Interim Feedback

15th December 2016

Review of the FCA Crowdfunding Rules

On the 9th December 2016, the Financial Conduct Authority (FCA) published a Feedback Statement providing interim feedback on their Call for Input in relation to a post-implementation review of their Crowdfunding Rules.

Whilst the FCA is continuing their ongoing research and investigatory work into the post-implementation review of loan-based and investment-base crowdfunding market – expected to be completed in the early part of next year - they have now provided an interim update following their Call for Input over the summer.

Crowdfunding Post-implementation Review

The rules governing crowdfunding (‘Crowdfunding Rules’) were first introduced in February 2014 with the aim to protect investors of loan-based and investment-based crowdfunding platforms.

The FCA’s Call for Input in July 2016 summarised the developments within the crowdfunding market since 2017 along with some of the FCA’s emerging concerns.

The feedback the FCA received from the Call for Input has since raised a number of issues for discussion, particularly concerned with risk posed to consumer detriment, which have now been laid out within the Interim Feedback Statement (FS16/13).

Changes to the Crowdfunding Rules

The regulator, having reviewed the Call for Input feedback and together with their supervision of the crowdfunding platforms actively trading, is now of the position that they need to revise various aspects of the Crowdfunding Rules.

Of particular concern to the regulator are the following findings:

Findings related to Investment-based crowdfunding:

Finding related to loan-based crowdfunding:

What is expected to change?

These concerns over the Crowdfunding market have resulted in the FCA looking to alter the following requirements within the rules:

FCA Next Steps

The regulator will look to conclude their post-implementation review of the Crowdfunding Rules before determining whether they need to consult upon any further rule changes.

However, an early consultation is planned for next year to address those rules which the FCA believe are of more immediate concern.

In the meantime, the FCA will continue to conduct consumer and market research on the crowdfunding market until the completion of their review, currently timetabled for early 2017 and we can expect at least one, if not two, consultations in early 2017 on proposed changes to the Crowding Rules.

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