What has been called a “Terrifying Misuse of Legislation” was debated Thursday at the Westminster Crowdfunding Forum where it was unanimously agreed that it’s essential to tackle an over regulation of social media which is threatening both the Crowdfunding industry and the individual liberties of all those involved. Including ordinary people who, say the FCA, can now be criminalised for a simple retweet of factually correct information or for expressing their opinion.
More worryingly this seems to have been slipped in quietly, via the back door, by a regulator unable to grasp the realities of either social media or Crowdfunding and without proper consultation or parliamentary oversight. They seek to treat conversations and opinions about equity crowdfunds as if they were paid for financial promotions – adverts to you and I – and so to control the crowd as well as platforms and vendors.
Government and parliament have been consistently supportive of Crowdfunding but worryingly it seems that parliament may have been misled into thinking that a long and substantial consultation on social media has been conducted prior to publishing new rules ‘later in the summer’ after it rises, but this is not the case. No such substantial or prominent consultation has taken place and these new rules are already being applied, it has emerged, without democratic scrutiny or even government sign-off.
There’s certainly been no attempt to consult, let alone alert, citizens more generally. Which is why this urgently needs attention, including a wider debate. Such changes must not be made in back rooms – smoke filled or otherwise,
The FCA have claimed that this restriction on the use of social media and ‘innocent bystanders’ to mention, discuss and ‘signpost’ equity crowdfunds is an inevitable application of FSMA (…2000). This is not the case as the FCA have a much wider latitude than this suggests to interpret the law which was, of course, formulated before the advent of social media.
To help provide clarity we have worked closely over the last month with Chris Moss, a leading lawyer in the field at JMW Solicitors, who also advised the ‘Bank of Dave’ and appeared in the programmes, to create a draft amendment to the relevant exemptions, which can be enacted by the secretary of state, without the need for primary legislation. So clarifying the FCA’s remit and responsibilities and protecting the rights of crowdfunders and citizens more generally. This is being provided as a submission to ministers, for urgent consideration before parliament rises on 22th July.
“We hope this will enable a proper balance to be struck and avoid inadvertently catching innocent and normal everyday activities. The idea that online posts, of themselves, engender immediate, dangerous, investment decisions – which now have to be taken via regulated platforms in the crowdfunding and peer to peer space – is misconceived since you can only transact via regulated platforms.” Moss commented.
Stephen Hazell-Smith, a well known city figure and one of the architects of AIM (the Alternative Investment Market – a ‘junior-stock market’ which is a part ot the London Sock Exchange) said “I have been a regulated, authorised, person for some 25 years and in that time I have seen many examples of unwarranted actions and poor performance by the financial regulator but I have never seen such a terrifying misuse of legislation”.
“Leaving aside for now the issues of free speech and the people’s rights to talk about, and express an opinion on, anything they choose this is as deeply regressive as way back when the horse and carriage trade was trying to stop the use of mechanised transport and persuaded parliament to pass an Act that insisted a man with a red flag walk in front of any mechanised vehicle. Except this time ministers and parliament have yet to be properly consulted.”
Last Thursday’s debate which was held in Committee Room 8 at the house of Commons included contributions from a range of platforms and trade bodies, as well as representatives of key government departments, and reached a clear consensus and resolved that urgent representation should now be made to ministers as well as to those directing the FCA.
Barry James is the co-founder of TheCrowdfundingCentre and the Social Foundation. Founded in 2012, the organization was created to further research, education and policy initiatives into the new, post-crash economy and “Crowdnomics”. James also created “Crowdfunding: Deep Impact”, the UK’s first national conference held in February 2013 which led to the influential Westminister Crowdfunding Forum. James is a frequent speaker on crowdfunding, entrepreneurship and innovation.