The recent review of crowdfunding regulation from the Financial Conduct Authority (FCA) was published on Friday, and seems to have landed on many media desks with a loud thump – followed by silence.
We'll be publishing our own reaction to this chunky document shortly. Meanwhile, we offer this clear first-take on the FCA report from our friends at Crowdfundinsider.
"Achieving more diverse and accessible financing for individuals and SMEs as well fostering "rigorous competition" for existing retail banking is a stated priority of the UK government," reports Crowdfundinsider. "This ambition to foster Fintech innovation is, of course, balanced by the need for consumer protection."
Below, we list the questions asked of the industry by the FCA. The answers are due in early September.
FCA Questions on Crowdfunding
Q1: Do you consider that there is the potential for regulatory arbitrage with banking business? If so, what measures should be considered to address it?
Q2: Do you have any concerns about, or evidence of, differences in the treatment between retail and institutional investors?
Q3: Have you seen any initial evidence that the ISA wrapper has led to consumers not fully appreciating the risks involved in Innovative Finance ISA investments?
Q4: Are there differences in borrower protection between commercial and non-commercial agreements that would be best addressed by applying additional rules to P2P platforms, or are the existing rules adequate?
Q5: Do you agree with our analysis of the key developments in the loan-based crowdfunding sector over the last two years?
Q6: Are you aware of current or emerging risks that firms current infrastructure, systems, and controls might not be adequate to deal with?
Q7: Do you have any comments on our concerns over the development of new loan-based crowdfunding business models? Have there been other specific developments that are relevant to the high-level standardssummarized above?
Q8: Do you have any comments on the standards of disclosure on loan-based crowdfunding platforms?
Q9: Are our current financial promotion rules for loan-based crowdfunding promotions proportionate? If not, can you please provide examples?
Q10: Is our approach to online and social media promotions proportionate? Do you have any suggestions as to how to improve our rules or approach on promotions?
Q11: Should we require loan-based crowdfunding platforms to assess investor knowledge or experience of the risks involved? What would a proportionate requirement look like?
Q12: What effect do you think loan-based crowdfunding has had on competition in lending and investment/savings markets?
Q13: Where do you think regulations could be amended
to increase confidence in loan-based crowdfunding markets, encourage the development of the markets in the interest of consumers or increase competition by removing uneven playing fields?
Q14: Do you have any comments on the resolution plans of firms operating loan-based crowdfunding platforms?
Q15: Are there any other matters we should take into account in the post-implementation review of loan-based crowdfunding?
Q16: What other market developments should we take into account in our review of the investment-based crowdfunding sector?
Q17: Do you have any comments on the management of conflicts of interest on investment-based crowdfunding platforms?
Q18: Do you have any comments on current due diligence standards for investment-based crowdfunding platforms?
Q19: What do you think of the current client assessment standards on investment-based crowdfunding platforms?
Q20: What do you think of the current standards of information disclosure on investment-based crowdfunding platforms?
Q21: Should we mandate the disclosure of risk warnings in relation to non-readily realizable securities held within Innovative Finance ISAs?
Q22: Are there any other matters we should take into account in the post-implementation review for investment-based crowdfunding?
Money&Co.'s latest loan offering is an A-rated loan of over £455,000. The borrower is an independent adviser looking to use the funds to expand. The loan auction closes in four days' time. The offering is currently 97 per cent funded, with a current indicative gross yield of 8.5 per cent.
Our loans are only offered if our borrowers are free of all other debt, and have a track record of sustained profit. Moreover, Money&Co. takes a charge on the assets of the company, which is exercisable if a borrower defaults. The relevant assets could then be sold and used to reimburse lenders. As yet, after two years' trading, no borrowers are in default. See our recent article on Money&Co.'s conservative attitude to vetting deals.
That said, remember that when lending, capital is at risk. See warnings on Home, Lend and FAQ pages.