New rules to be implemented by the Financial Conduct Authority (FCA), which will restrict the amount of money novice investors can inject into crowdfunded businesses to a mere 10% of their assets have received a mixed reaction from the investment community.
The FCA published a policy statement (PS14/4) which outlined the 'new regime that will apply to firms operating loan-based crowdfunding platforms' from April 1st.
Some of the key proposals issued by the FCA include:
- Information related to loan-based lending platforms must be clearly presented, and platforms must not downplay the risks associated with peer-to-peer lending.
- Under the new rules, peer-to-peer lending sites will have to ensure that loan repayments continue to be collected, even if a platform itself runs into difficulties (or collapses altogether).
- Any information which compares the interest rates of peer-to-peer lending with 'high street' rates must be fair, clear, and not misleading.
Fortunately for peer to peer lending platforms that focus on property acquisitions, the 10% limit excludes property assets.