The review found that it was difficult for investors to assess the risks and returns of investing on a platform and to compare platforms with each other or to compare crowdfunding with other asset classes.
It also revealed that some financial promotions did not always meet the FCA’s requirement of being “clear, fair and not misleading”.
In the loan-based crowdfunding market, it was found that certain features, including some of the provision funds used by platforms, introduced risks that may not be sufficiently understood by investors.
Other concerns highlighted included the plans some firms have for wind-down in the event of their failure and client money handling standards.
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Andrew Bailey, chief executive of the FCA, said: “Our focus is ensuring that investor protections are appropriate for the risks in the crowdfunding sector, while continuing to promote effective competition in the interests of consumers.
“Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas.
“We plan to consult next year on new rules to address the issues we have identified.”
The new measures include strengthening rules on wind-down plans, restrictions on cross-platform investment and extending mortgage-lending standards.
The current rules on crowdfunding came into force in April 2014.
The full research and investigation is expected to be completed in early 2017, after which the FCA will determine whether further consultation is needed.
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