People looking to lend money or invest through crowdfunding will be better protected under new rules confirmed by the Financial Conduct Authority (FCA).
A statement on the FCA website read: “By boosting consumer protection, the rules will help ensure that consumers have access to fair, clear information that is not misleading, when using loan-based, or securities-based crowdfunding platforms.
Christopher Woolard, director of policy, risk and research at the FCA, added: “We want to ensure that consumers are appropriately protected – but not prevented from investing.
“We have been careful to listen to feedback from the market and the rules provide consumer protection, whilst allowing businesses to continue to have access to this innovative method of funding.”
The FCA stated that ‘the crowdfunding market is small, but growing rapidly’.
Securities-based crowdfunding, which the FCA already regulates, allows people to buy shares or debt securities in a company. Last year £28m was raised for growing businesses, an increase of around 600 per cent compared to 2012.
Loan-based crowdfunding (mainly peer-to-peer (P2P) lending), which will be regulated by the FCA from April 2014, saw £480m lent by consumers to individuals and businesses in 2013, a rise of around 150 per cent on the previous year.