Exclusive: Regulator to bring in tighter controls on peer-to-peer lending

The City watchdog will today announce a new crackdown on the crowdfunding and peer-to-peer lending industry, which is expected to top £1bn by 2016.

There will be stronger protection for investors and tighter regulations for companies seeking cash through crowdfunding.

People who lend money to businesses through peer-to-peer websites will be given of a cooling-off period. Lenders – and small firms who borrow from them – will have 14 days to withdraw from deals with no penalty.

The Financial Conduct Authority will also force crowdfunding firms to advertise responsibly, and only promote offers to sophisticated investors.

Christopher Woolard, the director of policy risk and research at the Financial Conduct Authority, said: "Because so many new businesses fail, and because you might lose all of the money you invested, crowdfunding should only be targeted to those who have experience of high-risk investing, and have enough money to absorb any losses."

Under the proposals, which will come into force next April, ordinary investors will have to certify that they will not invest more than a tenth of their portfolio in unlisted shares or unlisted debt securities. The regulator is concerned by the number of new firms that fail, between 50 and 70 per cent. It points to an ethical soap-maker Bubble & Balm, which raised £75,000 through crowdfunding but collapsed earlier this year.

The growing success of peer-to-peer is seen in UK small business lender Funding Circle, which today announced it is launching in the US, just three years after setting up.

The business is joining forces with San Francisco lender Endurance Lending Network in a deal backed to the tune of $37m (£23m) by European venture capitalist Accel Partners, which has previously backed Facebook, Spotify and Dropbox.

Harry Nelis, an Accel partner who will join the board of Funding Circle, said: "We see the potential to build the category-defining company in online business lending."

The world's first peer-to-peer lender, Zopa, said yesterday that it has lent £400m to UK borrowers since launch in 2005, including £100m in the last six months alone.

Mass appeal

* In June, Scottish pub company BrewDog raised more than £1m from investor fans of its Punk IPA beer in just 24 hours after launching a crowdfunding scheme to fund expansion plans.

* Earlier this year Nicola Horlick attracted £150,000 in a day for her latest business venture, a fund management firm called Glentham Capital.

* Meanwhile, Kevin McCloud, presenter of television's Grand Designs, raised £1.4m for his firm Hab Housing, which aims to build well-designed but low-cost housing.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Financial Director / FD / Senior Finance Manager

    Up to 70k DOE: Guru Careers: We are seeking an experienced Financial Director ...

    Recruitment Genius: Junior / Apprentice Sales Executives - OTE £50,000

    £11000 - £50000 per annum: Recruitment Genius: This financial company offer ma...

    SThree: Recruitment Consultant

    competitive + incentives + uncapped comms: SThree: Did you know? 98% of our di...

    SThree: Trainee Recruitment Consultant

    competitive: SThree: Did you know? 98% of our directors started with SThree as...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks
    The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

    The haunting of Shirley Jackson

    Was the gothic author's life really as bleak as her fiction?
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

    Tourists are limp, leaderless and distinctly UnAustralian

    A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen