Crowdfunding to be further regulated

Peer to peer lending will be subject to a new regulatory framework under new rules.

The Financial Conduct Authority (FCA) launched a consultation this week aimed at determining its approach to regulating the practice, also known as crowdfunding.

The FCA will take over the regulatory role from the Office of Fair Trading next April, and this week’s consultation is one of a series intended to help it decide how to regulate a range of consumer credit services.

The FCA’s remit and the terms of the consultation suggest that the Authority will focus on the marketing of crowdfunding investments to the public. Many offer very attractive returns, but there has been concern that the level of risk is not being properly communicated.

Some crowdfunding remains unregulated. There have been calls for the entire industry to come under the auspices of a regulatory body.

According to the FCA consultation, the Authority’s “current rulebook was not designed with crowdfunding in mind. We are consulting on a revised approach to regulating firms that operate investment-based crowdfunding platforms or market unlisted equity or debt securities.”

Concerned parties can respond to the consultation until 19 December, and responses can be made on the FCA website.