Crowdfunding is a way in which people and businesses (including start-ups) can try to raise money from the public, to support a business, project, campaign or individual.
The term ‘crowdfunding’ applies to several internet-based business models, only some of which we regulate.
We don’t regulate:
We do regulate:
Crowdfunding usually takes place on a website platform that allows businesses or individuals to raise money, and investors to provide that money. The business or individual seeking finance often explains their project in a pitch to attract loans or investment from as many people as possible.
There are different models and, as the market is still evolving, it is possible that new types of platforms and new risks will emerge.
Consumers may find it rewarding to be involved in a business or project as it develops, or to support a local initiative or other individuals. Crowdfunding platforms may offer higher returns than those available from other financial products, though there are usually greater risks.
Crowdfunding can be a useful way for organisations or individuals to access finance that banks or other lenders are not prepared to offer, or only offer at a high cost. So this source of finance could benefit the wider economy, or a local economy.
Different platforms and loans carry different levels of risk. Consumers who invest via loan-based crowdfunding platforms need to be aware that:
We regard investment-based crowdfunding in particular to be a high-risk investment activity. In addition to the risks associated with loan-based crowdfunding, you should also be aware that:
Most platforms do not have a way you can cash in your investment (a secondary market).
Before investing, you need to understand:
We believe that consumers looking to invest in crowdfunding offers should take care. Given the typical risks involved, under our regulations, firms are only allowed to promote illiquid securities to particular types of experienced or sophisticated investors, or ordinary investors who confirm that they will not invest more than 10% of their net investable assets in investments sold via investment-based crowdfunding platforms.
You should only invest money you can afford to lose.
Find out more about our crowdfunding policy and how you can protect yourself in our policy statement on crowdfunding.
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