FSA warning over crowdfunding sites

Inexperienced investors should be aware of the risks in using crowdfunding websites that help small businesses raise money directly from members of the public, the Financial Services Authority (FSA) has warned.

"We believe most crowdfunding should be targeted at sophisticated investors who know how to value a start-up business, understand the risks involved and that investors could lose all of their money," the FSA said.

Only one crowdfunding website, Seedrs, which launched last month, is authorised and regulated by the FSA. None of the other sites is covered by the Financial Services Compensation Scheme or by the Financial Ombudsman Service.