FCA proposes more flexibility for crowdfunding platforms

The logo of the new Financial Conduct Authority (FCA) is seen at the agency's headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

LONDON (Reuters) - Britain’s financial watchdog on Thursday proposed giving crowdfunding platforms flexibility in how they handle money from investors after complaints the existing regime is too burdensome.

Crowdfunding refers to funding a project by raising small sums of money from a large number of people, typically over the Internet.

The Financial Conduct Authority (FCA) said that under current rules, money from investors must be kept separate from a firm’s own money and from the firm’s unregulated lending to businesses.

“We understand that some firms consider this burdensome as firms in the peer-to-peer (P2P) industry have generally not developed systems to distinguish between money held for the purposes of P2P agreements and money held for business-to-business (B2B) agreements,” the FCA said in a statement.

“We propose to allow firms that hold money in relation to both P2P and B2B agreements to be able to elect to hold both kinds... if they wish to do so. Firms may then segregate P2P and B2B monies together, but separately from the firms’ money,” the FCA added.

Reporting by Huw Jones; editing by Jason Neely