kingsley napley crowdfunding legal concerns
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Crowdfunding: often overlooked legal concerns4 October 2012
Andrew Solomon, Corporate & Commercial Solicitor
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Financial Services Authority
• Regulated Activities
• Financial Promotions
• The FSA’s opinion
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Regulated Activities (1)
• The ‘general prohibition’ under FSMA 2000:
> a person (individual or corporate body) may not carry out a regulated activity in the UK unless authorised (by the FSA) or an exemption applies
• Contravention is a criminal offence – up to 2 years in prison and/or an unlimited fine
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Regulated Activities (2)
• Dealing in investments as principal or agent
• Arranging deals in investments
• Advising on investments
• Etc etc etc
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General exclusions
• Regulated Activities Order 2001
> Sets out circumstances where the general prohibition does not apply
> E.g. the exclusion applicable to groups and joint enterprises
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Financial Promotion Restriction
• A person (individual or body corporate) must not, in the course of business, communicate an invitation or inducement to engage in investment activity…
• …unless authorised by the FSA, the content of the communication is approved by an authorised person or an exemption applies
• Contravention is a criminal offence – up to 2 years in prison and/or an unlimited fine
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Financial promotion: exclusions
• Financial Promotion Order 2005
> Sets out exemptions to the financial promotion restriction e.g. when the communication is made to certain recipients:
» Self certified sophisticated investors» High net worth companies etc.
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FSA Opinion: August 2012
• “Many crowdfunding opportunities are high risk and complex”
• “We believe that crowd funding should be targeted at sophisticated investors”
• “Almost all crowdfunds are not authorised by us and you will not have access to the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong”
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Andrew Solomon, Corporate & Commercial SolicitorKingsley Napley [email protected] 020 7369 3794
Questions