FCA considers tightening crowdfunding rules

"We believe now is the right time to consider whether our requirements remain appropriate and that we have the right rules to support the development of this dynamic market"

For loan-based crowdfunding, the FCA is considering whether to tighten disclosure rules for firms and whether platforms should be required to assess investor knowledge or experience of the risks involved in this type of investment.

It is also considering FSCS protection for investors in the event of a platform failing.

In 2015 an estimated £2.7billion was invested on regulated crowdfunding platforms, up from £500 million in 2013, with more than 100 platforms either operating in the market or seeking authorisation. The FCA introduced rules for the regulation of crowdfunding platforms in March 2014.

The FCA is also reviewing how conflicts of interest are managed on investment-based platforms and whether the due diligence rules for platforms need to be strengthened.

It also wants to mandate the disclosure of risk warnings in relation to non-readily realisable securities (such as unlisted equities) held within Innovative Finance ISAs.

Christopher Woolard, director of strategy and competition at the FCA, said: "The crowdfunding market is an innovative and growing sector and one which we see as part of promoting effective competition.  We introduced rules in 2014 to ensure consumers were protected without preventing the market from enhancing competition through expansion and innovation.

"Since then the market has grown rapidly and we want to explore concerns that have been expressed about developments in some aspects of the market. We believe now is the right time to consider whether our requirements remain appropriate and that we have the right rules to support the development of this dynamic market by ensuring consumers are adequately protected."