What’s happened to the mainstream media? Crowdfunding has been has been wagging its collective tail in a frenzy of puppyish joy over the enlightened, light-touch style of the UK’s leading regulator, the Financial Conduct Authority (FCA).
Well, the excitement's over, folks.
The FCA’s light touch now seems to have all the delicacy of a punch-drunk boxer wearing oven gloves.
Consider this, from Reuters: “New UK crowdfunding firms are waiting an average of six months to receive authorisation from the financial regulator because of the level of scrutiny required, according to consultancy Bovill.
“Bovill said that just two crowdfunding firms had been authorised by the Financial Conduct Authority (FCA) in the last nine months, with a further 15 still awaiting authorization.”
Six months? Six months? This report - typical of the coverage this week - has all the punch and verve of a radio announcer droning through a maritime weather forecast. The outlook for crowdfunding is sunny with occasional showers: basically, dull.
All this despite the fact that the delays are set to get worse. According to Bovill an increase in the amount of time taken to allocate a case to an FCA caseworker has also been a contributing factor to the longer approval process for crowdfunding firms. While previously an application for approval was allocated to an individual in the authorisation team within two weeks, under the current regime it can now take over 12 weeks.
Gillian Roche-Saunders, head of venture finance at Bovill, is at least perturbed: “It is concerning that it is taking the FCA so long to authorise crowdfunding businesses.
The FCA needs to address the lack of resources
“The FCA wants to ensure quality control over business plans particularly relating to consumer protection, but it also needs to weigh that against the costs and uncertainties that the approval process causes for new businesses.
“The Government are very keen to promote innovative financial technology and help fill the funding gap that exists in some parts of the market, yet many viable businesses may not get off the ground if it continues to take so long to be authorised.”
Bovill adds that the FCA backlog is likely to increase once P2P lending firms will be required to apply for authorisation from August 2015. P2P lenders are currently required to apply for interim permission from the FCA.
If crowdfunding doesn't kick up a fuss it will only have itself to blame
Gillian Roche-Saunders says: “The FCA needs to address what appears to be a lack of resources if it is going to catch up with the current backlog of applications – especially as it will begin taking applications from peer to peer lenders in a matter of months.”
Is it us, or does something need to be done? The crowdfunding industry isn’t making much of a fuss – nor is the mainstream or industry media. If the industry stagnates along with its regulator - and can’t even be bothered to kick up a fuss - it will only have itself to blame.