In October 2014 the Financial Conduct Authority (FCA) introduced new rules on the emerging market of equity crowdfunding. These rules are concerned with who equity crowdfunding companies can market their services to, and they were introduced in response to the unprecedented growth in the use of crowdfunding as a platform for investment.
To summarise the regulations, there are a few basic criteria that a person would have to fulfil to be eligible to take part in equity crowdfunding. Firstly, the person must understand what they are investing in and how crowdfunding works; secondly, the person would need to be able to demonstrate that they can afford the investment, and this can be done by establishing that the person is either: A) a high net worth individual, B) can be classified as a Sophisticated Investor, C) is under the recommendation of someone approved and regulated by the FCA, or D) can show that they are a Restricted Investor (i.e. they are not investing the entire sum of their available assets).
These rules are designed to make equity crowdfunding safer for the Crowdfunders; they allow investors to be safe in the knowledge that they are not being offered investments that they can’t afford, while at the same time regulating equity crowdfunding companies more closely to ensure good practice and mutual benefit between investor and project. This in turn helps build trust between equity crowdfunding platforms and the Crowdfunders that use them.
Bricksave have begun the process of becoming an FCA regulated business, which we hope to achieve in the next 9-12 months. We have always been keen to operate under the FCA rules ever since we founded the business and believe that in doing so we will become a more secure and reliable platform for our Crowdfunders. We believe that these rules help emphasise the importance of a trust relationship between investor and investing platform. We also believe that the rules will encourage our investors to adopt the best-practice method of investing via crowdfunding, which is to invest small amounts in multiple projects and create a diverse portfolio, rather than putting all their money into one investment.
The result of FCA input in the equity crowdfunding market will make for a fairer, more transparent landscape, allowing investors to invest their money with complete confidence and security.
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