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Crowdfunding - Novice Investors Restricted to 10% of Portfolio

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.

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