Change is coming for UK crowdfunding

CrowdBnk CEO Ayan Mitra talks about how changes to the UK regulatory landscape will affect equity crowdfunding

What changes is the industry expecting to the way it’s regulated?

In regards to equity crowdfunding, where regulation already exists, there will be more clarity given by the FCA around what are the platform’s obligations in order to operate in this industry especially around their obligations towards retail clients, towards entrepreneurs, towards the client money that they deal with. We believe that that would benefit the industry as a whole because it would enforce consistency and best practices and consumer protection across all platforms.

How will these changes impact on crowdfunding in the UK?

Crowdfunding is going through a hype curve. When we started looking at this in early 2010 there were very few players. Now, there are over 800 and every other week a new platform pops out. Clarity in regulatory structures will help in ensuring that platform operators do not cut corners to join this industry.There is currently some scepticism about the level of professionalism that goes in putting together a crowdfunding platform and operating it. Regulatory guidance and enforcement will ensure that all operating platforms are consistently following best practice around the hygiene factors of appropriateness, client classification, client money, and corporate structures.

There is a risk that we may get overregulation that may reduce margins and potentially disrupt the industry. However, we don't believe, based on our interactions with the FCA, that they are being unreasonable within their approach. We certainly agree that their policies towards consumer protection and ensuring that people understand what they are putting their money to.

What we don’t want is a scandal in this industry, which it could happen if regulations are not enforced. It could reduce the number of operators or force people to comply in a strict manner but that can only increase quality.

We recommend to check out in “How well is the crowdfunding industry regulated?”