THE FINANCIAL Conduct Authority (FCA) is working with the Cambridge Centre for Alternative Finance (CCAF) to carry out research into the peer-to-peer finance and equity crowdfunding industry.
Plans for a joint study between the City regulator and the research unit, which is part of Cambridge Judge Business School at the University of Cambridge, were announced today. The researchers will talk to investors and fundraisers to identify any changes to the industry and its place in the financial services sector.
The research will focus on the demographics of investors and how they are changing, as well as how investors assess risks and how they use the information provided to them.
It will also consider the different types of investments on offer and how they compare in terms of risks and returns. It will question how platforms and investors share the burden of due diligence and whether an expectation gap exists between the two sides.
The findings will contribute to the FCA’s ongoing post-implementation review. The FCA introduced new P2P regulations in March 2014, after taking over from the Office of Fair Trading in overseeing the sector. At the time it committed to a full review of the rules’ impact in 2016.
The FCA published a ‘call for input’ in July 2016, in which it expressed concerns about the transparency and due diligence of the platforms, as well as questioning whether investors were well enough informed as to the risks involved. The consultation closed on 8 September.
“It is our great pleasure to partner with the FCA in this joint thought leadership programme and provide independent academic evidence to support its post-implementation review of crowdfunding regulations,” said Robert Wardrop, executive director of CCAF.
“Since inception, the centre has strived to work with regulators and policymakers around the world to further our understanding of crowdfunding and other forms of online alternative finance, in turn, to inform evidence-based policymaking and regulation.
“We look forward to collaborating with the FCA very closely in the coming months to systematically collect market data, gather crowdfunding user feedback and undertake policy-related analysis.”
The FCA echoed this sentiment and added that it hoped to use the research to work out whether P2P regulation needs to change.
“We are currently conducting a post-implementation review of the crowdfunding rules, to see whether the market has evolved in such a way that we need to consider changes to the rules,” said an FCA spokesperson.
“A call for input, published in July, was the first stage of the review. We are also conducting firm and consumer research to understand further how different parties engage in the market and their needs and understandings. This is helping us develop an increasingly sophisticated picture of both investor and borrower experiences and needs, as well as business models and practices, systems and controls.
“CCAF will provide consumer research to support the post-implementation review. This research is expected to collect and analyse data from investor and fundraiser surveys, qualitative interviews and crowdfunding platforms’ transactional databases.”