FCA & Cambridge University Partner to Review UK Alternative Finance

CCAF Cambridge Centre for Alternative Finance May 2016The Financial Conduct Authority (FCA) and the Cambridge Centre for Alternative Finance (CCAF) have formed a unique partnership to assist in the review of the UK alternative finance industry. The first joint project will inform the FCA’s ongoing post-implementation review of crowdfunding regulation which is in process now.

The UK is widely viewed as a global leader in its regulatory approach to new forms of finance including peer-to-peer lending and crowdfunding. The Cambridge Centre for Alternative Finance has been the global leader in research on disruptive finance publishing multiple reports spanning the world.  The two entities will be working on a program of research that will identify any changes in the nature of the industry, the expectations of its clients, and its place in the financial services landscape.

According to the CCAF, the joint research will focus on:

  • What the crowdfunding investor population really looks like and how it is changing
  • How investors on the platforms assess risks, and how they use the information provided to them by fundraisers
  • What types of investments crowdfunding firms are competing with for investors’ money – and how they compare in terms of risks and returns
  • How platforms and investors share the burden of due diligence and whether an expectation gap exists between the two sides

The CCAF / FCA joint research will collect and analyze data from both investor and issuer surveys. This will include qualitative interviews and crowdfunding platforms’ transactional databases.

Robert Wardrop 2Robert Wardrop, Executive Director of the Cambridge Centre for Alternative Finance, said it was a great pleasure to work with the FCA and to be able to provide independent, academic evidence support on the post-implementation review of regulations.

“Since inception, the Centre has strived to work with regulators and policymakers around the world to further our understanding of crowdfunding and other forms of online alternative finance, in turn, to inform evidence-based policymaking and regulation,” said Wardrop. “We look forward to collaborating with the FCA very closely in the coming months to systematically collect market data, gather crowdfunding user feedback and undertake policy-related analysis.”

In 2014, FCA rules came into force for the regulation of crowdfunding and peer-to-peer lending platforms operated by FCA-authorized firms. At that time, the FCA stated it would be carrying out a full post-implementation review of the crowdfunding market and regulatory framework in 2016. The goal would be to identify whether further changes were required to reflect market developments. A call for input was issued by the FCA in July of this year. While the comment period has been officially closed the FCA is still interested in garnering additional insight from participants in the alternative finance sector. The FCA / CCAF partnership was thought to be unprecedented in the realm of financial securities regulation.