Several high-profile failures of investment platforms – including Lendy and London Capital & Finance – have put the Financial Conduct Authority (FCA) under pressure to look again at the regulation of certain types of investments. The FCA published a discussion paper in April with proposals for how to address the harm from what it designates as high-risk investments. This follows on from its ban on the marketing to retail investors of ‘speculative illiquid securities’ or bonds where the proceeds are used to acquire or develop property or for on-lending, among other things. There are specific exemptions to this ban, including where the property is being used for the issuer’s own general and commercial purposes.
The FCA is concerned about “consumers investing in inappropriate high-risk investments which do not meet their needs.” We share the FCA’s aim of ensuring that retail investors are accessing investment products that are appropriate and meet their needs. This resonates with our values of transparency and excellence. We also believe in sustainability and want to give individuals the opportunity to invest directly in organisations that create the kind of world they want to live in. Our investment products, including our crowdfunding platform, are intrinsic to meeting this objective.
The FCA’s intended approach – described in their discussion paper – shows a direction of travel of further restricting access to investment crowdfunding for those who aren’t wealthy or already have investment experience. Given this, we thought it important for the FCA to hear directly from investors, which is why we worked with the UK Crowdfunding Association to survey our platform users so that you could give your views to the regulator and be heard.
We sent out the survey to registered users on the Triodos crowdfunding platform opted in to marketing content. Thank you to all those who responded. The messages from investors from a broad group of crowdfunding platforms were very consistent. The UKCFA’s response to the discussion paper included a summary of the research that was carried out. Investors of crowdfunding platforms have a better handle on risk than the FCA gives them credit for. Respondents overwhelmingly felt that transparency, risk warnings and appropriateness tests were very much fit for purpose and that restricting choice – by a blanket marketing ban on certain products – isn’t the right approach.
We’ve submitted our own response to the FCA. We noted that while it is important to hold regulated firms such as ourselves to very high standards, we mustn’t make the rules so onerous that it pushes companies to raise capital and access investors via unregulated routes. We think consumers are better served working through authorised intermediaries.
Triodos Bank exists to create positive change and encourage people to choose positive impact with their money and investments. We want to keep these direct investment opportunities available to those investors who are comfortable making their own investment decisions. With a typical investment minimum of £50, this means making a direct impact with an investment needn’t be the preserve of the wealthy. Let’s hope we can keep it that way.