June 4, 2019 / 9:49 AM / 12 days ago

Britain sets tougher rules for crowdfunding platforms

LONDON, June 4 (Reuters) - Platforms offering loans to small companies in Britain by tapping many investors must comply with tougher rules from December, the Financial Conduct Authority said on Tuesday.

Crowdfunding, or peer-to-peer (P2P) lending, came under the spotlight last month when the FCA forced P2P lender Lendy into administration, with the regulator still investigating the firm.

The new rules impose more explicit requirements on platforms to clarify what governance arrangements, systems and controls they must have.

Platforms will also need more robust plans for how they could be closed down in an orderly way if they fail. They will have to assess investor knowledge and experience of P2P investments, where no investment advice has been given to them, as well.

“These new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner,” the FCA said in a statement.

The FCA published new rules on Tuesday based on draft measures put out for public consultation last July. It said it refined its original proposals to ensure the new rules protect consumers and support the P2P market.

“In particular, additional guidance has been provided to make it clear that platforms will not be prevented from including information about specific investments in their marketing materials,” it said.

There is already a requirement for P2P platforms to be authorised by the FCA.

One senior sector official said the demise of Lendy was a “car crash” which may have forced the FCA to come up with much tougher rules than those proposed last year.

Reliance on money from retail investors has already declined, with a growing emphasis on institutional investors, the official said. (Reporting by Huw Jones)

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