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FCA to toughen crowdfunding rules

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The FCA plans to toughen its rules for crowdfunding firms, including extending mortgage-lending standards to loan-based platforms.

The regulator today issued an update on its review of the loan-based and investment-based crowdfunding market.

The regulator has proposed several new rules for the market, which it will consult on in early 2017.

The new rules include more prescriptive requirements on the content and timing of disclosures by both loan-based and investment-based crowdfunding platforms.

For loan-based platforms only, the FCA plans to consult on strengthening rules around wind-down plans, imposing additional restrictions on cross-platform investment and extending mortgage-lending standards to loan-based platforms.

In its update, the FCA says it has found it is difficult for investors in both loan-based and investment-based crowdfunding platforms to compare crowdfunding with other asset classes because of complex and often unclear product offerings.

It also says it is difficult for investors to assess the risks and returns of investing on a platform and that the way some firms are structured leads to conflicts of interest that are not being managed properly.

FCA chief executive Andrew Bailey says: “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.”

The FCA expects its research and investigatory work to be finished early in 2017.


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