What's next for investment-based crowdfunding and the promotion of mini-bonds?
Last week the Financial Ombudsman Service agreed to investigate the c.£7m loss suffered by UK mini-bond investors following the collapse of Secured Energy Bonds plc in 2015, having previously told investors that the collapse was not within its remit. The promotional material for the mini-bonds was approved by FCA regulated firm Independent Portfolio Managers in 2013 and investors claim that that the mini-bond promotion did not comply with FCA rules.
The story puts the spotlight back on to the regulation of mini-bonds, a popular financial product which is increasingly sold on investment-based crowdfunding platforms as well as through direct marketing. The FCA tightened its rules around the promotion of mini-bonds and other "non-readily realisable investments" in April 2014 and is currently undertaking a full post-implementation review of these rules, as well as the crowdfunding rules which it introduced at the same time.
The post-implementation review is intended as a precursor to a FCA consultation on the introduction of additional rules for crowdfunding platforms, which is due by end of March 2017. The FCA has announced that the consultation will include a proposal for more prescriptive requirements on the content and timing of disclosures by crowdfunding platforms to ensure that investor protections are appropriate for the risks in the crowdfunding sector.
In anticipation of the FCA consultation, we have created a briefing which looks at the current regulatory approach to investment-based crowdfunding and the promotion of non-readily realisable investments, as well as FCA developments in this area following the introduction of the new rules in April 2014.