FCA plans to extend mortgage rules to crowdfunding

"Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas."

The proposals for new rules, to be considered in Q1 2017, include more prescriptive requirements on the content and timing of disclosures by both loan-based and investment-based crowdfunding platforms.

The FCA is also consulting on strengthening rules on wind-down plans and additional requirements or restrictions on cross-platform investment.

In a recent review, the FCA found that it is difficult for investors to compare platforms with each other or to compare crowdfunding with other asset classes due to complex and often unclear product offerings.

In the loan-based crowdfunding market in particular, the FCA raised concerns that certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors.

Andrew Bailey, Chief Executive of the FCA, said: “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.”