Crowdfunding investment regulation in the UK

The approach in Britain to the regulation of crowdfunding is widely admired around the world, according to the UK Crowdfunding Association (UKCFA and the sector wants to maintain that position globally and be involved in shaping the future outlook of this part of the financial services industry.

Most crowdfunding platforms in the UK are regulated by the Financial Conduct Authority (FCA), and platforms must obtain FCA authorisation before commencing regulated activity.

However, platforms in other countries may be governed by local regulators, and there may also be regulations for non-resident investors.

New rules are expected soon to update the current regulations which date from April 2014. These will come out of a review into the sector carried out in 2016 with the aim of making sure that crowdfunding firms meet all requirements to be ‘clear, fair and not misleading’ with customers.

The UKCFA believes that there needs to be some clarification of the rules to meet recent growth and that must also take into account the need to balance and to promote competition and ensure investor protections are proportionate to the risks.

The current rules are regarded as being robust for equity property crowdfunding investment platforms as under FCA rules investor money is held safely by the authorised firm until the target amount for the crowdfunding investment has been raised, and that the crowdfunding investment platform will be able to substantiate claims made in its investment memorandums.

The FCA has indicated, in an interim report published at the end of 2016, that ‘tougher rules are required to protect investors in crowdfunding platforms and it should be easier for investors to compare crowdfunding sites with each other, or with other asset classes, and this is not always easy due to ‘complex and often unclear product offerings’.

It is not unreasonable from this to expect that the FCA will demand that the crowd property investment platforms consider the best interests of their users by making relevant data more transparent, more consistent, and therefore more comparable.

Andrew Bailey, the FCA’s chief executive, has indicated that it is in the peer to peer lending sector as an additional source of capital that rule tightening is being considered as this is the section that has changed most. ‘What we are trying to do is strike the right balance between enabling innovation and protecting consumers,’ Bailey said.

Bailey has also indicated that stricter regulations are most likely to facilitate tougher rules on wind-down plans, additional requirements or restrictions on cross platform investment and extending mortgage lending standards to loan based platforms.

Investment in property comes with risks as well as the possibility of rewards.

For more information visit here https://crowdlords.com/full-risk-disclosure

Is Property Crowdfunding Here To Stay?

Crowdfunding on the internet may have begun in 1997, but it took nearly 10 years before people began seeing it as a viable form of investment. Within a short time, individuals and businesses began adopting it as a means to raise the much needed funds to carry out projects.

Before crowdfunding in properties became popular, the industry was restricted to only the really wealthy or very large property development companies and institutional investors with the skills, experience, and resources to invest in, develop and manage properties.

Since it began gaining wide acceptance as an alternative form of investing through internet platforms, a lot of people have been championing the advantages of property crowdfunding. In the UK, this alternative form of investment has become a serious industry with very little signs of fading away. It has gotten so popular, especially with millennials that in 2015 alone, the UK property market saw investment in properties via crowdfunding attract investments in excess of £87 million.

Property crowdfunding makes it possible for just about anybody to get involved in the property market irrespective of experience, qualification or size of capital. It also helps reduce the risk associated with investing. Unlike the traditional mode of property investment where the liability resides solely on one individual or company, property crowdfunding shares this risk equally among the pool of investors. Of course, the risk remains, but if there is a loss, it will be suffered by more people effectively making it bearable.

While there are those who feel property crowdfunding is a fad that may fade out anytime soon, investors are a bit more optimistic. There are several indicators to point out that investing in UK property funds via crowdfunding has the potential to cause a disruption in the way people invest in properties, such as providing similar tax benefits like those associated with other forms of investment, especially in terms of equity thanks to the recent changes in tax laws.

There are even pointers that suggest the Government may consider crowdfunding as a viable solution to financing and that with a bit of regulation, it may even trump other traditional investment options such as savings and banking.

Like every other form of investment, there is no denying the fact that property crowdfunding has its own issues, a lot of which experts are working hard to iron out, but despite this, crowdfunding provides a much needed solution to debt financing for small and first time investors, developers and property entrepreneurs. This investment trend has experienced tremendous growth in countries like China and US and will likely be adopted by property markets across the globe in no time.

As interest rates remain at its low level, more and more people will start searching for a way to earn better returns on their money, something that regular savings may not give. There is little doubt that with a bit more control, crowdfunding will dominate the property market in UK, and effectively become one of the major sources of residual income for small time investors.

Investment in property comes with risks as well as the possibility of rewards.

For more information visit here https://crowdlords.com/full-risk-disclosure