The FCA’s regulations are intended to make sure these services are transparent and that sufficient safeguards are installed to prevent any wrongdoing.
One of the new regulations is that of a “10% rule”. This is simply to stop people investing no more than 10% of their net investable assets, excluding their home, pensions and life insurance. This will not apply to those who are deemed sophisticated investors and will also not be applicable to peer-to-peer lending.
The new rules will also attempt to protect those getting involved in loan-based crowdfunding. Investor’s money will have to be ringfenced to ensure it is not lost, while a third party must be available to take over in case a platform goes bankrupt.
Not everyone is happy with the new regulations though.
Christian Faes, the co-founder of the peer-to-peer lending platform Lendinvest, said: “We fear it will not protect the public from loan defaults in the peer-to-peer sector, which is crucial for long-term sustainability of the peer-to-peer lending industry.”
There are also concerns that smaller investors, who can be an integral part of a successful campaign, will have difficulty in getting involved. Criticism has come from supporters of equity-based crowdfunders. Stephen Hazell-Smith, co-founder of the Aim and Plus equity markets said: “Our regulator has taken the crowd out of crowdfunding by putting in place rules on just who may be permitted to be an investor.”