The UK Financial Conduct Authority has criticised crowdfunding websites for downplaying risk. The regulator says it is particularly concerned about promotions which encourage investors to view loan-based crowdfunding as being equivalent to holding money on deposit in a bank. “Investors should understand that there are greater risks involved and they may lose some or all of their money, the FCA says.
The regulator reports that over 60% of investors don’t have previous investment experience, while there is also evidence that a number of crowdfunding sites have deleted critical comments that might have warned others certain companies.
However, the regulator declined to name any of the offending websites, which is odd conduct. Surely that would serve to highlight the risks for poorly informed investors.