Across Europe, crowdfunding is quickly moving from a fringe funding instrument to becoming a mainstream – finance channel, connecting “crowds” to fund businesses, projects and individuals. In its recently published Report on Crowdfunding in the EU Capital Markets Union, the European Commission details the importance of crowdfunding as “an important source of non-bank financing in support of job creation, economic growth and competitiveness” (European Commission 2016). While there remains no harmonised regulatory framework applicable to crowdfunding across Europe, individual mem- ber states have adopted national regulatory approaches to supervise crowdfunding activities – “tailoring their regulatory frameworks to the characteristics and needs of local markets and investors, which results in differences on how the rules are designed and implemented” (European Commission 2016, 4-5). This article will focus on the regulatory regime in the United Kingdom that regulates and supervises online alternative finance activities that fall under the crowdfunding umbrella.
The United Kingdom is the leader in online alternative finance in the European market, accounting for just under 75 percent of all transaction volumes in Europe (Wardrop et al. 2015). In 2015, online alternative finance in the United Kingdom grew to GBP 3.2 billion, increasing by 84 percent from GBP 1.74 billion in 2014 (Zhang et al. 2016). Sizeable growth in 2015 coincided with successful integration of sector regulation, alongside continued government support for alternative finance. While many member states have opted for a “wait and see” approach to crowdfunding regulation, the United Kingdom was of the first nations to create bespoke regulation for crowdfunding activities. As the regulating body that monitors and supervises crowdfunding activities in the UK is the Financial Conduct Authority (FCA)2, this article will centre on the regulatory regime that it has adopted.