Friday 4 April 2014

Weekly Wrap Up: FCA rules on Crowdfunding

This week The Financial Conduct Authority did a lot to help consumers. This was, however, at the expense of businesses. In short, it set out new rules on payday lenders that would shut-down about half of the industry. Similarly, it has imposed rules on the nascent crowdfunding industry that could severely hinder its growth.

The concept of crowdfunding - by Rocio Lara
The FCA has always had a tough balance to strike when dealing with alternative funding; on one hand it has to encourage the industry to grow in order to open up an important access route to capital for SMEs struggling to obtain credit. At the same time it has to ensure that it is adequately protecting investors from risky start-ups. The result of this balancing act is that whilst the FCA seems to have struck a fair deal for peer-to-peer lenders (whose business models work around debt based finance), its equity-based finance counterparts in the crowdfunding sector have been hit punitively. These news rules may stop this form of finance in its tracks.

Under the new rules, equity-based crowdfunding will be subject to the “10 per cent” rule whereby investors must certify that they are not committing more than 10% of their net investible assets, excluding their home, pensions and life insurance. This rule will only be waived for those deemed to be “sophisticated investors”, and will not apply to peer-to-peer loans. This arbitrary limit on the amount of money that an individual can invest into crowdfunding ventures will, therefore, inevitability exclude small investors.

It would be a great shame for the crowdfunding industry, a great source of innovation that has opened up a new pool of capital to small businesses, to be quashed at such an early stage in its development. SMEs are driving the British economy and, therefore, the recovery of it. With lending levels by Banks at historic lows, putting these draconian rules in place will only reverse some of the great progress that has been made to kick-start lending and the economy.

This week, Abchaps attended the Global Mining Finance Spring Conference at the London Chamber of Commerce and Industry, which brought together miners and financiers looking at the most favourable regions for mining, as well as the hottest commodities for investments.

Who can resist a fun quiz? Abchaps enjoyed Farrer & Co's fab Quiz Evening, as well as hosting an environmental-themed market lunch. In view of the need to have effective Non-Executive Directors to support the reputation of a company, we attended the Peel Hunt NED Awards - a great opportunity to recognise the contribution that London’s NEDs make to the City.

To end the week on a high, we will be sipping cocktails tonight at the Association of Chinese Financial Professionals’ UK networking drinks.

This week saw Brewin Dolphin appoint Guy Foster as Head of Research having made a considerable impact at the firm over the last eight years. Panmure Gordon also appointed a new Head of Equity Research, Jeremy Grime. Over at Field Fisher Waterhouse Owen Talfan Davies joined as a Real Estate litigation partner. Charles Stanley Group also announced that Anthony Scott will take on the role as Head of Investment Management.

Crowdfunding”: the collection of finance to sustain an initiative from a large pool of backers. Companies who have recently turned to crowdfunding to source capital have also used the opportunity to market the business as well as fund it; Naked Wines is one such example.

In the mood for some contemporary art? Sunday 6th April is the last day of the Institute of Contemporary Arts’ display of Richard Hamilton’s famous ‘Man, Machine and Motion’ and ‘An Exhibit’ exhibitions. Composed of thirty steel frames and installed photographs, this re-showing of his mid-1950s work will certainly distract even the busiest of minds.

Another event not to be missed, and which is fast on its way out, is the London Coffee Festival, being held at 15 Hanbury Street until 6th April. This is the UK’s largest coffee and artisan food event, celebrating London’s vibrant culture and love of this favourite type of “brain fuel”. Tickets for this event can be bought for different sessions; bunch, lunch or tea-time.

Finally, an event for the contemporary Londoner: The Ceramic Art London show being held at the Royal College of Arts. This show will display the work of over 75 ceramic artists, with collections up for sale as well as for display. This three-day event, which ends on 6th April, includes talks, discussion and demonstrations.

Follow us on Twitter @AbchurchComms

No comments:

Post a Comment