The City watchdog has revealed new rules under which crowdfunding firms (including peer-to-peer lenders) will have to operate from April.
The Financial Conduct Authority said that the rules should mean consumers have access to fair, clear information when using crowdfunding platforms. Christopher Woolard of the FCA said: "We want to ensure that consumers are protected, but not prevented from investing."
New regulations for securities-based crowdfunding restrict people to investing up to just 10 per cent of their available assets, unless they have the relevant knowledge and experience to invest more.
The rules on loan-based crowdfunding focus on ensuring that consumers understand the risk and who will borrow the money.
New prudential regulations will be introduced to ensure crowdfunding platforms have capital to help withstand financial shocks. This is important as anyone who lends money will not be able to claim through the Financial Services Compensation Scheme.