A surge in the interest of crowdfunding as a business finance alternative has led to the creation of the UK Crowdfunding Association (UKCFA), an institution which will provide consumer protection.
A group of 12 crowdfunding platforms are coming together, including buzzbnk, CrowdMission and Peoplefund.it.
According to figures from the newly-formed body, in the last twelve months over £10 million was invested in UK small businesses via crowdfunding.
The UKCFA has published a ‘code of practice’ which its new members must comply with in the hope that it will provide protection fro investors, donors and businesses using the finance method.
According to a statement, the UKCFA code encompasses members such as Crowdcube and Seedrs, which provide products that require them to be regulated by the Financial Services Authority (FSA), as well as those that are outside of current regulation.
Measures include: segregating investors’ and donors’ money from that of the crowdfunding business; implementing processes to ensure information and investments are safe; installing a cooling-off period after making an investment and publishing details of members’ executive directors.
Also being included is an effort to ensure that business and IT processes are reliable and secure, and complying with regulations applicable to sales and marketing activity.
Back in November, the government announced plans for a new regulatory framework to legitimise crowdfunding and open it up to new markets.
The decision came following a change to the financial service bill, which is currently working its way through parliament, and will ultimately mirror the actions being taken by the United States as part of its JOBS Act.
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Speaking to GrowthBusiness Carlos Silva, president and chief operating officer of Seedrs, says, ‘Seedrs is a founding member of the UKCFA because we ourselves are committed to promote market confidence in the crowdfunding sector.
‘Our view is that Crowdfunding is only sustainable if platforms ensure that donors, lenders and investors are treated fairly and that we behave in the most transparent way possible.
‘The UKCFA code of conduct provides a minimum set of principles that contributes to safeguarding all parties involved, regardless of wether the platform in question is donations based, which has virtually no outside regulation, or equity based, which is regulated by the FSA.’
Also speaking to us, Ayan Mitra, founder of CrowdBnk, adds, ‘The future of the crowdfunding industry depends on the trust consumers associate with it.
‘Having a code of conduct that puts the consumer experience at the heart of the industry goes a long way in doing that. We joined it to ensure that collectively crowdfunding achieves it’s objectives of becoming a mainstream alternative funding option for everyone.’
To coincide with the creation of the UKCFA, Julia Groves, managing director of member platform Trillion Fund has been installed as the body’s chair.
Groves comments, ‘The launch of the UKCFA marks a major milestone for crowdfunding, as we move from an emerging to a mainstream investment model.
‘2013 is hugely exciting, not just in terms of projected growth, but in working for a proportionate regulatory framework.’
Full list of founding members:
- Trillion Fund