FCA warns P2P investors may not understand risks

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The FCA wants feedback on what to include in its upcoming review into crowdfunding rules, including around Innovative Finance Isas.

The review will consider both loan and investment-based crowdfunding.

The FCA is seeking feedback on whether investors are aware of the risks involved with innovative finance Isas.

The call for input document, published today, says: “There is anecdotal evidence that suggests [peer-to-peer] investors in the past were relatively wealthy or knowledgeable.

“The availability of P2P investment through Isas and pensions, or at retirement using money released from pensions, may create a change in the investor base toward retail investors who are less experienced or knowledgeable, who trust the Isa ‘brand’, and who may not fully appreciate the risks involved.”

The regulator also says P2P will be considered as part of its review of the Financial Services Compensation Scheme. Investors currently do not have access to the FSCS if borrowers fail to meet loan repayments or if a crowdfunding firm fails.

Due diligence, conflicts of interest and disclosure are also part of the call for input.

FCA strategy and competition director Christopher Woolard explains the regulator introduced rules on crowdfunding in 2014.

Woolard says: “Since then the market has grown rapidly and we want to explore concerns that have been expressed about developments in some aspects of the market. We believe now is the right time to consider whether our requirements remain appropriate and that we have the right rules to support the development of this dynamic market by ensuring consumers are adequately protected.”