THE BREXIT vote has pushed the UK back in its EU negotiations over crowdfunding rules, Abundance co-founder Bruce Davis has warned.
The joint MD of the peer-to-peer finance platform, which only makes ethical investments, called for more emphasis on fintech in Wednesday’s Autumn Statement and urged for clarity for the sector during the UK’s long unravelling process from the EU.
Current EU prospectus rules – which are a part of the Markets in Financial Instruments Directive – stipulate that companies need to issue a prospectus for debt- or equity-based crowdfunding activities of more than €5m (£4.25m). The industry is campaigning to raise this to €10m, as it argues that the cap is too low and makes compliance costs proportionally too high on smaller fundraisings.
Brexit means the UK will not have to comply with these rules after leaving the bloc, but the legal process is expected to take two years after Article 50 is triggered, leaving the industry in a prolonged period of uncertainty.
“We’ve been pushing hard to raise the cap to €10m,” Davis (pictured), who also co-founded the UK’s largest P2P platform Zopa, told Peer-to-Peer Finance News. “The UK was leading that process [before the vote] but now we’re having to work with European partners.
“The prospectus is another costly layer of regulation and it needs the Financial Conduct Authority to sign it off, making it uneconomic for smaller firms.”
Davis added that fintech “has not been captured” in the government’s announcements on innovation, made in the run-up to Wednesday’s mini-Budget.
Prime Minister Theresa May pledged on Monday to increase investment into research and development by £2bn per year by 2020, alongside other measures to boost science and technology innovation in the UK.
“There is still something to be said about maintaining the UK’s status as a fintech hub,” he said.
“More government support is needed in getting these ideas to market.”
He warned that Brexit could slow down innovation in the fintech sector and said it was important “that the UK maintains its voice for the next two years”.
Read more: Brexit weighs on UK fintech investment
Abundance has offered an Innovative Finance ISA (IFISA) since April, but could only start lending out customers’ investments after new rules came into effect on 1 November that allowed crowdfunded debt securities in the tax-free wrapper.
“We’ve attracted more than £3.5m in investment since the start of November thanks to the IFISA and the acceleration is showing no signs of slowing down,” said Davis.