News Briefing - Crowdfunding, SME And Alternative Finance

a crowd, most mostly men, checking information and prices

1.UK – AltFi

 FT Adviser reports on the LCF case:

 

“The Financial Services Compensation Scheme has confirmed it will not accept claims from investors in collapsed mini-bond provider London Capital & Finance.

London Capital & Finance entered into administration at the end of January, putting the funds of more than 14,000 bondholders at risk.

Shortly before the collapse the Financial Conduct Authority ordered London Capital & Finance to stop marketing its fixed-rate investment bonds and Isa products and the provider had its assets frozen by the regulator.

The FCA alleged the Tunbridge Wells-based firm had signed clients up to fixed-rate Isas promising 8 per cent interest, with investors' capital then invested into mini-bonds used to issue loans to small businesses.

There were concerns the 14,000 clients of the firm may not have fully understood the nature of the investment they were making due to unclear marketing material.

As unregulated investments, London Capital & Finance did not need to be authorised by the FCA to issue the mini-bonds but it did need to be authorised to issue the promotion of the mini-bonds.

In a statement on its website today (March 6) the FSCS confirmed it would not be accepting claims against the insolvent company because mini-bonds are unregulated investments and therefore not protected by the compensation scheme.  

However, the scheme advised if it became aware of circumstances that "give rise to potentially valid claims" it would begin to accept applications against London Capital & Finance.

The statement read: "If this happens, we’ll communicate this to customers on our website.

"We’re working closely with the administrators to understand more about how the firm carried out its regulated activities."

At the end of January Finbarr O’Connell, Adam Stephens, Colin Hardman and Henry Shinners of Smith & Williamson LLP were appointed as joint administrators of London Capital & Finance, with a dedicated helpline and email address set up for affected parties.”

2. UK – FinTech

 

CityAM reports:

 

“UK consumers have been warned to avoid an illegal cryptocurrency firm posing as an authorised company. The Financial Conduct Authority (FCA) said Next Coin Market is an fraudulent organisation based in Bulgaria which is attempting to scam UK customers.

The company dupes victims by sending customers a link to a fake website that gives the impression that it is accredited by the City regulator when it is not.

“We believe Next Coin Market is an illegal organisation based in Bulgaria, claiming to be an FCA authorised firm offering cryptocurrencies to UK consumers,” the regulator said in a statement.”

3. US – FinTech

Crowdfund Insider reports:

Wave, a Canada-based financial services and software for small businesses, announced on Wednesday it has acquired Every, a fintech company that provides business accounts and debit cards to small businesses. Wave reported that theacquisition advances its plans to integrate more financial products and services directly into its platform. It will also help entrepreneurs improve cash flow, get paid faster, save time and money, and better understand how their business is doing.”


 

4. International – FinTech

 

Does crypto mean crime? Crowdfund insider examines the latest evidence:

“In its latest “Strategic Alliance Bulletin,” auditing firm PwC (formerly-known-as PricewaterhouseCoopers) has countered the sanguine narratives in crypto by stating unequivocally:

“Cryptocurrency has increasingly been associated with serving criminal and nefarious purposes, rather than supporting the decentralisation of ‘traditional’ currency.”

That said, the company does not provide any metrics regarding the size of purported crypto “social good” phenomena for the sake of comparison.

The report, rather, focusses entirely on illicit use of crypto, which, PwC says, is growing:

“The use of digital currencies to launder illicit money is a growing trend for threat actors, likely a result of their inherent decentralised and anonymous qualities.’

This conclusion is based on data from law enforcement, says PwC:

“Europol estimates that approximately EUR 3 – 4 billion of criminal proceeds is being laundered in Europe annually through cryptocurrencies. The FBI also reports that digital currencies, including those mentioned above, are widely used for money laundering.”


5. International – FinTech

 

Bob’s Guide looks at the role of sandboxing in regulation.

 

“A regulatory sandbox is a framework that allows fintech start-ups and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision. 

Nicole Sandler, vice president, fintech and regtech, EMEA legal lead, Barclays, says that “one of the biggest reasons that companies enter a sandbox is because they want to understand if they can put a product out into the market and they want to have a relationship with the regulator to see if their product is actually viable in the real world.”

The pros of the existence of sandboxes are many:

  • Mitigation of risk for innovative firms:  A sandbox can help ensure safety for the entire financial system, allowing innovation and consumer protection to coexist
  • Reduced time to market: Uncertainty and interruption affects firstmovers and inhibits innovation
  • Access to finance: Innovators get easier access to finance as both product viability and regulator welfare are maintained
  • Transparency: Uniform enter and exit standards ensure transparency, and regulators can exercise close scrutiny
  • Minimizing costs: Compliance costs can be prohibiting. Sandboxes enable safe testing within legal barriers
  • Limited failure penalties: Testing in the regulatory sandbox offers organisations an opportunity to explore if their product or service works in real time, allowing for modifications before the need to commit to a full market launch.

But they aren’t without their difficulties:

  • Time: The fintech industry depends on decreasing time to market. Coming up against a regulatory hurdle has the potential to waste time with increased bureaucracy
  • First mover advantage: Filings with the regulator increases the chances of the technology becoming outdated
  • Difficult to implement:  Successful implementation of a regulatory sandbox may be jeopardized by institutional arrangements for regulation and supervision
  • Costs: Operating a regulatory sandbox requires adequate resources (staff and funding). Where capacity is already stretched, stretching it further may have a negative impact on other areas.”