In March 2014, the FCA in the UK produced a policy statement on crowdfunding rules outlined in earlier releases. The statement published crowdfunding rules that were put into law on April 1st, 2014. These rules were based on the FCA’s belief that investments should only be promoted to those who understand or have the financial capacity to cope with any potential loss.
The key highlights related to loan-based crowdfunding are as follows:
Minimum capital requirements are required for a crowdfunding UK platform operator. The financial requirement is the higher of – a % of the volume of loaned funds, or a fixed minimum of £50,000 (if or before April 2017, £20,000).
For larger firms, the metric is being re-calibrated so that prudential requirements are reduced for those subject to the volume-based requirement and a further tier will be inserted into the metric.
There is also an FCA-regulated activity of operating a loan-based crowdfunding software uk platform. If the loans meet certain criteria, FCA authorisation will be needed. These include: the investor must be a partnership consisting of two or three persons not all of whom are bodies corporate; an individual, or an unincorporated body of persons which does not consist entirely of bodies corporate and is not a partnership. Therefore, persons providing business-to-business loans not meeting these criteria will not be regulated by the FCA.
Firms will not fall within the remit of the FSCS. However, the firm will hold this money as trustee and such monies must be held subject to the FCA’s client money rules. Information about the platform must be disclosed and advertised so customers know who they are dealing with. Platforms must have plans in place so that loan repayments continue to be collected even if the online platform gets into difficulties.
Any promotions (such as print, broadcast or online advertising) must be fair, clear and not misleading and, if inappropriate, can be banned by the FCA.
In relation to investment-based crowdfunding software UK:
The restrictions the FCA placed on the marketing of UCIs will apply to crowdfunding platforms that offer these investments, limiting promotion of UCIs primarily to retail clients who are certified as high net worth investors or are certified or self-certify as sophisticated investors, and professional clients.
If offering an opportunity to invest directly in unlisted shares or other securities to retail clients, firms may only promote these platforms to: retail clients who confirm they will receive regulated investment advice or investment management services from an FCA authorised person, certified high net worth investors, certified or self-certified sophisticated investors or retail clients who certify they will not invest more than 10% of their portfolio in unlisted shares or unlisted debt securities.
In addition, firms will need to think about whether information they provide amounts to advice as the firm may need to apply to the FCA for permission to advise on investments.
Review the current equity crowdfunding UK discussion:
Here are just a few features for crowdfunding software UK included in the CrowdForce platform software:
• Currency options include $, £, € with more custom options available
• Localization and language packs available
• Complete and simple document signing and management
• Easy offline payments, custom payment solutions available
• Plug in your local escrow account
• Plug in your broker services for accredited investments
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