If you are a small FCA authorised and regulated financial services firm and you are running your business as well as the compliance function, you are no doubt regularly bogged down with work which you would consider an administrative burden.
We work with firms like yours.
Last week the FCA issued a consultation paper (‘CP’) on Loan-based (‘peer-to-peer’) and investment-based crowdfunding platforms, proposing changes to the existing applicable regulatory framework.
What are mini-bonds?
A 'bond' is a debt instrument under which an investor lends money to a borrower, usually a corporate entity. Bonds are issued by the borrower on specified terms which are contained in a 'bond instrument'.
Use the flowchart (and accompanying notes) below to consider whether the restriction in section 21 of FSMA 2000 applies to your communications:
Source: Financial Conduct Authority (FCA)
Using the internet to promote an investment is an effective way to access a large audience. Those using this medium must, however, ensure that they are not in breach of the rules imposed by the Financial Conduct Authority (FCA).
For small businesses, outsourcing is the ideal option to achieving cost savings. This is certainly the case for core functions, such as IT, marketing and accountancy services, where businesses can take advantage of employing expert services whilst avoiding the need to increase staff costs and overheads.
However, there is now a growing emphasis on specialised outsourced arrangements - bringing value to a company above and beyond the cost savings made.
How does an outsourced financial controller/director add value?
The FCA has the power under section 137S of the Financial Services and Markets Act 2000 that enables them to ban misleading financial promotions. This power means the FCA can remove promotions immediately from the market, or prevent them from being used in the first place, without going through their enforcement process.
The Conduct of Business Sourcebook (COBS) 4.2 specifies that:
A firm must ensure that a communication or a financial promotion is fair, clear and not misleading.
In June 2013 the Financial Conduct Authority (FCA) published a policy statement and final rules to ban the promotion of units in unregulated collective investment schemes (UCIS) and other non-mainstream pooled investments (NMPIs) to the vast majority of retail investors in the UK from 1st January 2014.
A financial promotion is a communication that is an invitation or an inducement to engage in investment activity.
In other words, there is an element of persuasion. An inducement is intended to lead, ultimately, to an agreement to engage in investment activity. So an advertisement by a firm claiming customers will make a fortune by investing in securities, and that the firm can help them invest, is an inducement to engage in investment activity.
Thank you to Paul Sutton of LCN Legal for contributing this article. Paul's details can be found at the end of this article.
The Alternative Investment Fund Managers Directive applies to alternative investment funds (AIFs) that are managed or marketed in the European Union.
So what is an AIF?
In March 2014 the FCA issued it's Policy Statement, entitled 'The FCA's regulatory approach to crowdfunding over the internet, and the promotion of non-readily realisable securities by other media'.