News Briefing - Crowdfunding, SME And Alternative Finance

crowd, mostly men, studying notice board

1.UK – P2P

Peer2Peer Finance News runs a piece arguing that limiting exposure to P2P assets to 10 per cent of investors’ wealth could be beneficial to the sector.

“WHEN the Financial Conduct Authority (FCA) rolled out a new raft of rules for the peer-to-peer lending sector, there was one requirement which received decidedly mixed reviews. In an effort to promote diversification and risk awareness, the regulator announced plans to limit everday investors to investing no more than 10 per cent of their portfolio in P2P.

This announcement was met with concern that the 10 per cent rule could discourage new investors from considering alternative finance. However, opinions are now shifting as P2P lenders start to realise the potential benefits of the FCA’s soon-to-be imposed limit.”

2. UK – AltFi

The moves continue to restrict individual investors from getting involved in cryptocurrencies - or at least, derivative contracts:

“Earlier this month as previously reported,the UK Financial Conduct Authority (FCA) proposed a ban on the sale of both derivatives and exchange-traded notes (ETNs) based on “certain types of cryptoassets.” The announcement of the proposed ban kicked off a consultation, embedded below, for feedback from interested parties that is scheduled to close this coming October. A final policy statement and final Handbook rules is expected in early 2020.”

3. UK – Regulation


More from the FCA about the work it does to protect retail investors. The regulator is pursuing more firms for misconduct, and getting guilty verdicts.


“Misconduct cases among retail financial services firms jumped by almost a third over the last year, said UK regulator the Financial Conduct Authority (FCA).

The FCA dealt with 101 cases, a 29 per cent leap on a year ago, with the most high-profile probe coming in the January collapse of London Capital & Finance (LC&F), which left around 11,500 small investors facing as much as £236m of losses.

The downfall of LC&F has so far led to five arrests, after the Southampton-based firm sold high-risk mini-bonds, despite advertising its product as a low-risk individual savings allowance (ISA). An independent probe has also been launched into the FCA, concerning its oversight of the investment firm. 

Overall, the FCA trebled the amount of financial fines it handed out £227.3m in the year to March, up from £69.9m last year, according to its annual report published earlier this week.

And more significantly, an FSCS summary note looks at compensation for LCF investors, providing they can prove they had been “advised” to invest.”

4. UK – Regulation

FinanceFeeds reports that the Financial Services Compensation Scheme (FSCS) has released a practice note about investors who lost money in London Capital & Finance -


“Although Surge is not itself regulated, because it was acting on behalf of LCF and under its control, the Scheme is satisfied that LCF has liability for the advising carried out by Surge. Surge was not an appointed representative, but FSCS is satisfied that LCF is liable for Surge in this regard, as Surge was its agent acting with actual or ostensible authority and LCF is vicariously liable for Surge’s actions. LCF had few employees/staff, and all direct contacts with investors were via Surge, which is understood to have had approximately 40 staff who worked exclusively for LCF. Surge always held itself out as LCF when communicating with investors, e.g. by telephone and email. Sales were routed through Surge to LCF, such that investors would not have known that they were not dealing with LCF.

Only advising that happened after LCF became fully authorised on June 7, 2016 can be protected. FSCS understands that approximately 95% of current bondholders invested after this date. Further, in order to pay compensation, FSCS will have to be satisfied that a particular claimant received advice, relied on this when investing, and suffered financial loss as a result. Claims will also have to meet the usual requirements under FSCS’s COMP rules, e.g. as to eligibility.

The Scheme is in the process of designing its claims process in this regard and may obtain access to further investor communications from LCF’s administrators. FSCS has also requested LCF investors to complete a pre-application questionnaire in order to assist the Scheme in building a better picture of the extent of advising.

LCF has not yet been declared in default and FSCS is not yet accepting applications for compensation.

It is not possible at this time to estimate the number or value of potential advising claims.

Claims in relation to advising will fall to the investment intermediation levy class (Class 2), for which the annual class levy limit is £330 million (including a provider contribution of £90 million). If the levies on an FCA funding class would exceed the annual limit for that class, the excess is levied more widely on the other FCA classes as part of the retail pool.

Ongoing investigations could provide evidence that LCF has liability in connection with other regulated activities.”

5. International – P2P


OnDeck announces a Canadian partnership.

6. International – AltFi


The Financial Review on how capital formation practices are changing in Australia.