Last week Crowdfund Insider published a write up on the regulatory review completed by the Financial Conduct Authority (FCA) in the United Kingdom. At that time Crowdfund Insider quoted the FCA document that summed things up:
“We have seen the crowdfunding market continue to grow rapidly. We recognise that it is still early but, at present, we see no need to change our regulatory approach to crowdfunding, either to strengthen consumer protections or to relax the requirements that apply to firms.”
The Financial Times, and to a lesser degree WSJ.com, highlighted problems in the nascent industry avoiding gist of the report. The FT called the report a “rebuke” and WSJ.com focused on the “problems with most British crowdfunding investment websites”.
To further shed light on the disparity, Crowdfund Insider reached out to the source of the report to inquire if the review were a “rebuke.” A representative politely responded that this was not the case: the spokesperson clarified that they felt the report was balanced – something with which Crowdfund Insider concurs. The FCA also expressed concern regarding specific promotions – something that was noted in our coverage.
Within the crowdfunding industry the UK is broadly viewed as leading the charge. The UK has taken an enlightened approach to regulation noting the need to allow the young industry to evolve unencumbered by excessive regulations thus fostering an environment of innovation.
I recently connected with Luke Lang via email to share his views on the recent rebuke or not to rebuke debate. His responses follow:
Erin: What is your interpretation of the FCA’s recent regulatory review?
Luke: We welcome the FCA’s review of crowdfunding and its conclusion that it sees no need to change its regulatory approach to crowdfunding, either to strengthen consumer protections or to relax the requirements that apply to firms. As the UK’s leading platform, Crowdcube aims be an exemplar for other platforms to aspire to, particularly as the number of platforms entering the market continues to grow rapidly.
We are committed to working together with the FCA to achieve this goal and we’re pleased that Darren Westlake, CEO of Crowdcube, has been invited to speak by Martin Wheatley, the chief executive of the FCA, at the forthcoming four day International Organisations of Securities Commissions conference, which is a forum for global financial services regulators.
Erin: Why do you think that some have questioned the report as a possible rebuke?
Luke: It is frustrating and somewhat bewildering that a few people ignored the FCA’s conclusion that there was no need to change their regulatory approach to crowdfunding.
Erin: What’s the FCA’s role in change and innovation as more platforms enter the market in the UK?
Luke: Having enjoyed rare access to Martin Wheatley at a recent breakfast event on ‘regulating innovation in financial services,’ which was hosted by the London School of Economics, I was very encouraged by the measures the FCA has implemented over the past twelve months to better understand and nurture innovation by the UK’s top fintech companies. As the market leader in the UK, I strongly feel that is vital that the FCA effectively regulates all platforms (particularly newer entrants with less resources and experience of operating in a regulated environment) to ensure all platforms follow the high standards we have adopted. This should help to avoid potential issues occurring in the future.
Erin: And lastly, what changes would you suggest/have you suggested initiating in fintech regulations?
Luke: Currently, I have the same view as the FCA. The new regulations are working well and in my opinion strike the right balance by appropriately protecting investors whilst nurturing much needed new forms of finance for Britain’s start-up, early and growth stage businesses.