Risks hidden on crowdfunding sites, says FCA

5 February 2015

The Financial Conduct Authority has revealed there is concern with certain aspects of crowdfunding websites and how they present information to the public.  

25 websites that were reviewed demonstrated a lack of proper information, which could potentially mislead investors about the risks involved. The FCA thought some websites were unrealistic and too optimistic about certain investments. 

Furthermore, some sites implied that lender’s money would be secure as the process was compared to that of banks and saving accounts. 

Gonçalo de Vasconcelos , the CEO of crowdfunding company SydicateRoom, welcomed the FCA’s views and agrees websites need to be more transparent by including the clear risks involved when investing. SyndicateRoom was not one of the companies reviewed as misleading by the FCA.

He said, “Sadly these shortfalls in the behaviour and practices of just a few of the platforms can hurt the standing a reputation of the whole zone, which is both unfair and unhelpful to everyone concerned, including investors”.

It’s expected the FCA will report on their final findings later this year, which will include views about online communications and social media. 

Crowdfunding is fast becoming a popular way for individuals and business to acquire funding which they may have been unable to get from banks. A crowdfunding platform allows a large group of people or investors to fund a project or business idea. In return, they can receive merchandise or tickets to events etc and sometimes even shares, depending on what the project or business is.