22nd June 2021
- 3 comments
It is almost 20 years since the new framework for angel investment was enshrined in the Companies Act. Combined with the FCA’s rules on Financial Promotions, the industry has had a working solution to putting investors in touch with entrepreneurs. Within this framework equity crowdfunding has emerged as a meaningful force in providing capital to companies that want it.
However, various recent stories I have come across have caused me to pause. The recent news that the Financial Ombudsman has ordered CrowdCube to repay an investor his entire original investment (less EIS tax relief already claimed) was the first warning bell. Then I heard about an entrepreneur pestering an elderly person to invest by making repeated phone calls. The elderly person could not be considered High Net Worth, let alone Sophisticated. Most recently I have heard about a wealthy elderly person having been, in the view of their family, “groomed” to make several £10k EIS investments across a portfolio of companies. In that case the elderly person parted with their cash, got their first income tax claim in and then the companies and the promoter disappeared.
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3 comments:
David Bowman - 2021-06-22
As a UK-based investor and company owner, it is necessary to follow the investment onerous advertisement rules. Unless your pumping and dumping Bitcoin et al on YouTube. Also the HNWI financial levels criteria seem archaic and must limit few serious investors today. David
David Bowman - 2021-06-22
It's bizarre that influencers on Youtube et al have to state the inclusion of 'paid promotions'. But can get away with fleeting 'for educational purposes only' or a flash screen of catch me if you can 'disclaimers'. This is true whether the investment opportunity i.e. Bitcoin is via the UK or USA. If I tried to get a USA investor to invest in a UK SME company without the appropriate legal controls I could be open to a lawsuit. We need to target these YouTube pumps and dump videos. Only then will the FCA take notice After the horse has bolted? David
Oliver Woolley - 2021-06-28
A VERY insightful article Modwenna about regulation surrounding companies fundraising , whether it be directly or via regulated (and unregulated) crowdfunding and investment platforms. Most people recognise that investment in start-ups and scale-ups is beneficial for the economy but that more needs to be done to protect vulnerable investors (a tricky challenge without stifling the industry). To improve the future of early-stage investing I would like to see the FCA devoting more resources targeting and closing down "unregulated" platforms (they are looking to set up a taskforce we understand) who do nothing to make the world a safer investing environment.
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