Fran O’Brien
Investment Associate
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Crowdfunding, peer-to-peer lending, and micro
funding.
Disentangling the issues
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Learning Objectives
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Understand how the alternative finance industry has
developed in recent years
•
Understand the fundamentals of crowdfunding, peerto-peer lending and other forms of micro-lending
•
Assess the pros and cons of each
•
Understand the regulatory response to date
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Smaller amounts from more
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This is old news
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1250
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- 1250
1288
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- 1250
- 1288
- 1600
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- 1250
- 1288
- 1602
- 1600
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Liquidity
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Internet
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Reward
Equity
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Debt
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Reward
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Who are the major players ?
Since launch in 2009, 8.2 million people have pledged more than $1.6
billion, funding 80,000 creative projects. They operate a 5% Fee
From launch in 2008 to Sep 2014 total pledged was $378M in
to 246,000 creative projects with an average of 10% chance of success.
They operate a 9% Fee dropping to 4% for successful raises.
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Equity
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Equity Crowdfunding
Opening up the world of early stage investment
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Investor Led vs Company Led
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What should you look out for ?
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Is it clear who you are investing in ?
Is it clear what share class you are buying ?
What rights do the lead investor get ?
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What about the Legals ?
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Ignore the legals at your peril !
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Drag along, Tag along and Pre-emption
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SyndicateRoom always offer the same economic
rights and class of share as the lead investor (or better)
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Debt
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What should you look out for ?
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Is the loan asset backed ?
Can the company service its debts ?
What are the fees ?
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FCA Regulation – effective April 2014
• Applies to P2P lending/loan and investment
crowd-funding platforms
• FCA do not regulate other forms of crowdfunding, such as rewards-based or donationsbased crowd-funding
• PS outlines new regime
• Firms to comply with these rules from 1/10/14
• Full post-implementation review of the market
and regulatory framework in 2016.
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FCA Regulation – Equity Crowdfunding
“Given the typical risks involved, under our
regulations, firms are only allowed to promote
illiquid securities to particular types of
experienced or sophisticated investors, or
ordinary investors who confirm that they will not
invest more than 10% of their net investable
assets in investments sold via investment-based
Crowd-funding platforms.”
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FCA Regulation – Who does it apply to ?
• Professional (elective) clients
• Advised Retail
• (self) certified High Net Worth Individuals
• (self) certified Sophisticated Investors
• Restricted Retail Clients (10%)
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FCA Regulation – Q1 2015 Review
A number of providers we issued warnings:
• Inappropriate use of social media
• Deletion of negative comments
• Performing regulated activities while unregulated
• Downplaying of information eg risks
• 62% of surveyed ECF investors were inexperienced
• Comparing Loans to Savings
• Lack of presence or prominence of APR
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Whole Market Overview
Learning Outcomes
•
Understand how the alternative finance industry has
developed in recent years
•
Understand the fundamentals of crowdfunding, peerto-peer lending and other forms of micro-lending
•
Assess the pros and cons of each
•
Understand the regulatory response to date
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fran@syndicateroom.com
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