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Dear Board | Release Date: 15th January 2024

To read a shorter summary of this Dear Board letter, click here.

To access the original FCA document, click here.

Long Summary

The Financial Conduct Authority (FCA) has reinforced its commitment to supervising Investment-Based Crowdfunding (IBCF) platforms through an extensive framework designed to protect consumers and ensure market integrity. Operating under the FCA’s comprehensive regulatory structure, the Consumer Investments Directorate closely monitors IBCF platforms to identify and address potential risks.

Regulatory Landscape

Recent developments have significantly impacted the regulatory environment for IBCF platforms. Key documents such as PS22/10, PS23/11, PS23/13, and the Public Offer Platform Engagement Paper outline the current and future regulatory landscape, underscoring the need for stringent compliance and proactive risk management.

PS22/10 Implementation: Encompassing strengthened rules for promoting high-risk investments, PS22/10 aims to improve the customer journey into these investments. Key areas of change include enhanced risk warnings, prohibition of inducements to invest, introduction of cooling-off periods, and refined client categorisation and appropriateness testing.

Trading Venue Perimeter Guidance (PS23/11): This guidance provides clarity on when firms may be operating as a trading venue. Crowdfunding platforms operating secondary markets or ‘bulletin boards’ must ensure they do not inadvertently cross over into activities requiring trading venue authorisation.

Gateway for Financial Promotion Approvals (PS23/13): With the introduction of a new gateway for approving financial promotions, IBCF platforms need to evaluate their role in approving promotions, especially those created by unauthorised persons, and apply for the necessary permissions where applicable.

Public Offer Platform (Engagement Paper 5): This paper discusses a new framework for public offers of securities outside of public markets. It’s an opportunity for crowdfunding platforms to engage in the rule-setting process, focusing on ensuring investor protection and robust due diligence.

FCA’s Key Areas of Focus for IBCF Firms

FCA’s Supervisory Approach and Interventions

The FCA will maintain a vigilant and proactive supervisory stance, focusing on firms’ adherence to new and existing regulations. Key supervisory actions include:

Conclusion and Next Steps

In closing, the FCA emphasises the responsibility of IBCF platform Boards and Senior Managers in adhering to regulatory expectations. It’s vital for firms to remain vigilant, responsive to regulatory changes, and committed to high standards of consumer protection and market integrity.

IBCF platforms must continually evaluate their practices against FCA guidelines, ensuring that they meet evolving regulatory standards and contribute to a fair, transparent, and stable crowdfunding market. The FCA remains available for queries and guidance, underscoring its collaborative approach to regulation.

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