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FCA confirms plans to restrict crowdfunding promotion

The FCA has confirmed plans to restrict the promotion of investing in crowdfunding.

In final rules for the crowdfunding sector published today, the FCA confirms proposals published in October to restrict the promotion of these investments to clients who understand the inherent risks or have the financial capacity to cope with any losses.

Investment-based crowdfunding can only be promoted to sophisticated or high net worth investors, retail clients who are advised, and non-advised clients who are only investing 10 per cent or less of their net investible assets.

The FCA had also proposed firms must hold a minimum amount of regulatory capital, but says many respondents to the consultation believed the requirements were too high.

It has therefore amended these proposals, meaning some firms will have lower capital requirements.

FCA director of policy, risk and research Christopher Woolard says: “We want to ensure consumers are appropriately protected – but not prevented from investing.

“We have been careful to listen to feedback from the market and the rules provide consumer protection, whilst allowing businesses to continue to have access to this innovative method of funding.”

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  1. I was recently contacted by a client who had been declined finance by the banks. The decline was not on the basis of business viability but on the basis that field sports was considered unethical. My client was attempting to raise finance to restart an old sporting gun making firm in the Birmingham gun quarter and thereafter bring employment and opportunity back to this once vibrant trade.

    Following this decline it was rapidly found that due to FCA regulations, raising finance from the public by issuing shares was virtually impossible and so my client turned to crowdfunding. With this new regulatory creep, it seems to me that there come a point where the regulatory medicine is in danger of killing the entrepreneurial patient.

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