You can see the rules and regulations in other jurisdictions.
Alongside the UK's world-leading financial services marketplace, crowdfunding, peer-to-peer lending, and payment services have developed into strong markets in the UK.1
The UK's crowdfunding market is particularly advanced and sophisticated, prompting the FCA to launch a consultation in July 2018. This was to assess whether existing regulation was fit for purpose in ensuring sound business practices, especially when retail investors were involved. In response to that consultation, the FCA issued new rules and guidance designed to further bolster standards, coming into force in December 2019.1
There are some crowdfunding activities that require FCA approval, while others do not. The FCA's general high-level standards apply to all crowdfunding platforms, including the Principles for Businesses and specific Conduct of Business rules, such as those relating to financial promotions. There are, however, differences between investment-based crowdfunding platforms and loan-based crowdfunding platforms in terms of the detailed regulatory frameworks that apply.1
Investment-based crowdfunding has developed from the more traditional forms of obtaining equity investments, and thus is subject to the FCA's regulations. As such, an investment-based platform will normally require authorisation from the FCA to undertake activities such as setting up investments (Article 25 of the RAO), dealing in investments as a representative (Article 21 of the RAO) and providing advice on investments (Article 53). Platforms that offer a nominee structure are additionally obliged to make an application for permission concerning safeguarding and managing assets (Article 40).1
Operating a P2P platform was not included in the previous list of regulated activities, so the FCA introduced Article 36H of the RAO in 2014 to capture most forms of it. But take care that any other regulated activities featured in the business model - such as credit broking, debt administration, and debt collecting - also need separate permission from the FCA.1
Platforms do not prohibit the creation of secondary markets, but they are becoming increasingly rare with the more established ones due to the additional regulatory burden involved (not to mention the potential financial promotion implications). Platforms often create venture capital-like fund structures that allow investors to exit the funds without locating other users to purchase their units.1
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