[LONDON] New UK crowdfunding firms are waiting an average of six months to receive authorisation from the financial regulator because of the level of scrutiny required, according to consultancy Bovill.
Bovill said that just two crowdfunding firms had been authorised by the Financial Conduct Authority (FCA) in the last nine months, with a further 15 still awaiting authorisation.
Crowdfunding, often hosted on online platforms such as Crowdcube, allows individuals and small businesses to raise funds from pools of investors who put money into peer-to-peer schemes or securities such as unlisted shares.
It has become increasingly popular with private investors looking to make more from their money than they could from savings accounts at banks, which are offering lacklustre returns as a result of record-low interest rates.
The FCA introduced a new regulatory framework for crowdfunding firms last April to protect consumers and ensure that the industry was fully regulated. "The FCA wants to ensure quality control over business plans particularly relating to consumer protection, but it also needs to weigh that against the costs and uncertainties that the approval process causes for new businesses," said Gillian Roche-Saunders, head of venture finance at Bovill.