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.

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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.

Download the briefing here