Proposed New Regulatory Regime for Equity and Loan Crowdfunding

Crowdfunding can be explained as a source of raising money directly through a small or large number of people who all put different amounts of money towards an end goal and usually through the medium of the internet.  It has gained in popularity over the last ten years and is now a multi-billion dollar global industry.

The Isle of Man Financial Supervision Commission ("FSC") has recently released a Consultation for a proposed new regulatory licence status for crowdfunding in order to bring about an element of protection for investors / lenders in such crowdfunding ventures.  The Consultation has defined a number of different definitions but the most widely known are equity, loan, reward and donation crowdfunding.  Reward and donation crowdfunding are not under review for regulation by the FSC but more the loan and equity crowdfunding activities.

The regulation of loan and equity sourced crowdfunding ventures are deemed an important development by the FSC in order to secure a degree of protection for those participating in such ventures and also to clarify the current situation whereby crowdfunding activities may overlap existing financial legislation including Class 2 Investment Business as well as Money-Lending activities.  It is proposed that a new class of regulated activity be created separately for crowdfunding which will require application from experienced persons / businesses with a background in lending and financial services as well as being able to satisfy fit and proper tests.

The Consultation closed on 12th June 2015 and the results of the Consultation should be announced in autumn 2015.  It is hoped that this particular new regulated activity will offer the Isle of Man a new and exciting financial offering and provide new business opportunities for existing and new financial providers.

Corporate Options - 29th June 2015