Crowdfunding — the FCA publishes the rules

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In October 2013, the Financial Conduct Authority (FCA) published a consultation paper setting out its proposed approach to the regulation of crowdfunding platforms. Having analysed the feedback it received, on 6 March 2014 the FCA published a policy statement detailing its response to this feedback and, most importantly, setting out the rules that will apply from 1 April 2014.

What is crowdfunding? The FCA’s description is as follows: ‘Crowdfunding is a way in which people, organisations and businesses, including business start-ups, can raise money through online portals [crowdfunding platforms] to finance or refinance their activities.’ The FCA goes onto say: ‘Some crowdfunding activity is unregulated, some is regulated and some is exempt from regulation.’

Crowdfunding is an increasingly important part of business finance in the UK. The financial crisis meant that traditional sources of business finance became harder to access, while technological innovation allowed alternative options to enter the market. Crowdfunding has grown quickly. In the feedback to its recent consultation, the FCA was given notice of the following figures…

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