Coming from the pages of the Financial Times is an article today regarding the desire by some of the burgeoning group of Crowdfunding platforms. Some of these new financial platforms have been requesting regulation by the Financial Services Authority (FSA).
In lieu of uncertain or unwieldy legal clarifications one Equity Crowdfunding site, CrowdCube selected a different, more creative path. They decided to make every offering a subsidiary of CrowdCube:
Instead, Crowdcube took another route. When a company tries to raise money through Crowdcube, the company becomes a subsidiary of Crowdcube. Companies are allowed to issue shares in subsidiaries without FSA approval.
Crowdcube’s website states that it has been approved as a “financial promotion” by Bishop Fleming, the accountancy firm, in its capacity as an FSA-authorised company. “We don’t push that in people’s faces,” said Mr Westlake. “We’re not using it as a selling point. We have to say that for regulatory reasons. We don’t think it confuses anyone.”
CrowdCube has been successfully crowdfunding since 2011 having raised to date £4.875 Million via 27,668 registered investors.
Another UK based crowdfunding site Seedrs has already applied for FSA approval and expects to be certified later this year. But this process “took 18 months to prepare and 13 months for the regulator to process”. An eternity for a business just starting up.
Some UK banking officials have been very vocal about the need for equity based crowdfunding in the UK. Bank of England Director Andrew Haldane has publicly stated that crowdfunding could revolutionize lending in the UK. Some view this as a direct challenge to the traditional banking industry as it stands today.
Equity crowdfunding has already commenced in the UK while the regulatory groups in the United States have been slow to allow such capital raising platforms launch as of yet. Many US based industry participants expect that equity based crowdfunding will be fully legalized and regulated later this year.