UK crowdfunding sector launches trade association

The UK’s leading crowdfunding businesses have joined together to launch a trade body, the UK Crowdfunding Association, aimed at providing clarity and consumer protection and for the whole industry.

Crowdfunding in the UK has experienced massive growth over recent years. Operators provide a much-needed alternative source of finance for businesses looking to raise funds, and it is an easy and transparent way for ordinary retail investors to put money into projects and small businesses they wish to back. In the last twelve months over £10m was invested in UK small businesses via crowdfunding, and that figure is expected to grow significantly this year.

Ahead of this the UKCFA has published a code of practice which its members must comply with, aimed at protecting the growing number of investors, donors and businesses using the technology. While a number of UKCFA members provide products which require them to be regulated by the Financial Services Authority, others are beyond the scope of current regulation. The UKCFA code encompasses both categories, and ensures that all members are operating to a minimum standard.

The code requires:

– Segregating investors’ and donors’ money from that of the crowdfunding business;

– Processes to ensure information and investments are safe;

– A cooling-off period after making an investment;

– Publishing details of members’ Executive Directors on the UKCFA website;

– Ensuring business and IT processes are reliable and secure;

– Complying with regulations applicable to sales and marketing activity;

– Publishing customer complaints of our members on the UKCFA website.

Comprising the twelve lead crowdfunding businesses and key supporters, the UKCFA will work to raise awareness and understanding of crowdfunding as a valuable and viable means for businesses to raise money at a time when traditional bank lending is diminishing. Building on the recent HM Treasury announcement of a regulatory framework for peer-to-peer lenders, the UKCFA is committed to working with policymakers to help develop the right frameworks for crowdfunding.

Each member of the UKCFA will have a representative on the management committee, with Trillion Fund MD Julia Groves appointed its first Chair.

Julia commented:

“The value that crowdfunding offers to businesses, particularly SMEs, looking for funding is difficult to overstate. Along with peer to peer lending, our sector is already providing real value in the provision of capital for the engine room of the UK economy. At the same time, crowdfunding is rightly recognised by investors as a credible and transparent means to invest in some hugely exciting projects. Prior to this, investing in small businesses was restricted mostly to wealthy individuals who have the time and resources to undertake the necessary research and diligence. The emergence of crowdfunding makes it accessible for everyone.

“The launch of the UKCFA marks a major milestone for crowdfunding, as we move from an emerging to a mainstream investment model. 2013 is hugely exciting, not just in terms of projected growth, but in working with Government for a proportionate regulatory framework.”

SOURCE: Financial Reporter