kingsley napley crowdfunding legal concerns

kingsleynapley.co.uk

Crowdfunding: often overlooked legal concerns4 October 2012

Andrew Solomon, Corporate & Commercial Solicitor


Financial Services Authority

• Regulated Activities

• Financial Promotions

• The FSA’s opinion


Regulated Activities (1)

• The ‘general prohibition’ under FSMA 2000:

> a person (individual or corporate body) may not carry out a regulated activity in the UK unless authorised (by the FSA) or an exemption applies

• Contravention is a criminal offence – up to 2 years in prison and/or an unlimited fine


Regulated Activities (2)

• Dealing in investments as principal or agent

• Arranging deals in investments

• Advising on investments

• Etc etc etc


General exclusions

• Regulated Activities Order 2001

> Sets out circumstances where the general prohibition does not apply

> E.g. the exclusion applicable to groups and joint enterprises


Financial Promotion Restriction

• A person (individual or body corporate) must not, in the course of business, communicate an invitation or inducement to engage in investment activity…

• …unless authorised by the FSA, the content of the communication is approved by an authorised person or an exemption applies

• Contravention is a criminal offence – up to 2 years in prison and/or an unlimited fine


Financial promotion: exclusions

• Financial Promotion Order 2005

> Sets out exemptions to the financial promotion restriction e.g. when the communication is made to certain recipients:

» Self certified sophisticated investors» High net worth companies etc.


FSA Opinion: August 2012

• “Many crowdfunding opportunities are high risk and complex”

• “We believe that crowd funding should be targeted at sophisticated investors”

• “Almost all crowdfunds are not authorised by us and you will not have access to the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong”


Andrew Solomon, Corporate & Commercial SolicitorKingsley Napley [email protected] 020 7369 3794

Questions

mailto:[email protected]

kingsley napley crowdfunding legal concerns

Documents