FCA publishes Dear CEO letter to investment-based crowdfunding firms

On 17 August 2021, the FCA published a Dear CEO letter (dated 2 July 2021) which it has sent to investment-based crowdfunding firms (IBCF).

In it, the FCA outlines its objective to "ensure crowdfunding firms promote investment opportunities appropriately so that consumers can understand the risks these speculative and high-risk investments pose" and makes clear that it would expect IBCFs to have effective wind down plans and adequate financial resources in the event of failure.

In the letter, the FCA also sets out (a) the risks it has identified in the market, (b) its expectations of IBCFs (c) and a summary of the work it intends to carry out.

The risks, expectations and intended FCA work is set out in relation to:

• inappropriate investments;
• scams;
• oversight of appointed representatives; and
• disorderly firm failure.

The FCA will monitor IBCF activities and warns CEOs and other Senior Management Function holders that they will be held accountable if expectations are not met. The Letter notes that the FCA will be using the Senior Manager and Certification Regime (SM&CR) which has applied to IBCF platforms since 9 December 2019, to "engage directly with accountable individuals on areas of concern."