"Loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up to date as markets develop"
The regulator is inviting responses to a number of specific proposals to change the rules for loan-based firms.
The new rules aim to ensure investors receive clear and accurate information about a potential investment and understand the risks involved and that they are 'adequately remunerated' for the risk they are taking.
It also wants to extend existing marketing restrictions for investment-based crowdfunding platforms to loan-based platforms.
In its December 2016 statement, the FCA also committed to addressing a potential gap in protections for customers buying a mortgage or taking out a home finance product through loan-based crowdfunding. The FCA is now proposing to apply rules which would normally apply to home finance providers to P2P platforms, where at least one of the investors is not an authorised home finance provider.
The FCA says it has also observed "some poor practice" by some firms in the crowdfunding sector, particularly among loan-based platforms, but stressed that its proposals will "seek to improve standards in the sector but in a way that leaves scope for further innovation".
Christopher Woolard, executive director of strategy and competition at the FCA, said: “When we introduced new rules for crowdfunding, we said we’d review the market as it developed. We believe that loan-based crowdfunding can play a valuable role in providing finance to small businesses and individuals but it’s essential that regulation stays up to date as markets develop. The changes we’re proposing are about ensuring sustainable development of the market and appropriate consumer protections.”