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http://www.bbc.co.uk/news/business-26464551

Entrepreneurs say new rules from the UK regulator will "take the crowd out of crowdfunding".

The policies on crowdfunding, which come into force next month, have been drawn up by the Financial Conduct Authority (FCA) .

Crowdfunding taps into ordinary consumers who want to buy equity, or a stake, in a new start-up.

Many are hosted through a website platform such as Kickstarter, Indiegogo or RocketHub.

Investors and lenders often get rewards, linked to the amount they have pledged - such as badges, T-shirts, tickets, or whatever is being funded - as a thank-you for their support.

The FCA is now proposing that inexperienced investors will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses.

Firms that run the website platforms say the rules are too tight and will put off potential investors.

Barry James, founder of The Crowdfunding Centre, says: "Make no mistake, the infamous 10% rule - however it's dressed up - does just that: it takes the crowd out of equity crowdfunding."

Some of the new regulations cover peer-to-peer lending - a method by which individuals simply lend to an entrepreneur, again often through a website platform.

The FCA sees these as less risky, so the rules are less stringent, and many in the industry have welcomed them.

Samir Desai, chief executive and co-founder of Funding Circle peer-to-peer lending platform, told the BBC: "There are simple things [in the regulations] like keeping the company's money separate from the customer's money.

"It's putting in place sensible operating principles that you would expect in any financial service company."

Speaking to the BBC's Today programme, Chris Woolard, director of Policy, Risk and Research at the FCA, said: "We're trying to strike a balance between on one hand making sure consumers are properly informed and have real clarity about the investments they are getting into, but on the other hand, making sure this... source of funding is open to businesses and individuals."

The FCA also proposes that crowdfunding platforms should be clearly presented and understandable, and not downplay risks. They should have resolution plans in place, mapping out what happens if the business goes under.

It says that the platforms "must assess the appropriateness" of clients wanting to invest without professional advisers.

It adds that many investors are not aware of the risks involved and that between 50% and 70% of start-ups fail in the early years.

But fund manager Stephen Hazell-Smith, co-founder of the AIM equity market, said: "Last week, the French regulator threw open the doors to its adult population to invest in equity crowdfunding as it pleases.

"This week, our regulator has taken the crowd out of crowdfunding by putting in place rules on just who may be permitted to be an investor."

The Crowdfunding Centre, run by The Social Foundation, says that more than £1,700 per hour is being raised through crowd-funding in the UK.

It says that since the beginning of 2014, more than 2,600 equity and rewards projects have been launched - more than 45 a day.

Successful projects raised an average of a little over £9,500 each - a combined total of £2.4m.

Mr Woolard said: "What we are saying is, if you have never had experience of this before, we want you to gain more experience before you make a large investment."

The FCA is now proposing that inexperienced investors will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses.

Where does a business need to be listed to avoid this requirement? As far as I can tell that's the key to restricting or not restricting investment.

Reporting requirements, financial information etc., "investors" thereby having the tools we generally take to give you the opportunity to make an informed decision whether to invest or not.
...That would be my guess, anyway.

Can someone cut through the jargon gak there and let us know what it actually means for the average UK-based KS backer?

I'm not an expert but I think it means that, unless someone has other "real" investments, then they're gonna need to do their homework lest they put more than 10% of their total investments into start-up business (which make up a significant portion of crowdfunding).

 scarletsquig wrote:
Can someone cut through the jargon gak there and let us know what it actually means for the average UK-based KS backer?

It means they want people to agree to put only 10% of any investment money into kick starters.
They want the rest to be invested in the stock market, or banks. Ready for stealing, I mean seizing.

Okay, so if I back a KS, I'm not allowed to use more than 10% of the total money that I have in my bank account?

It means banks have joined the music industry in the "internet is a bad thing that makes people eat babies" club.

rowenstin wrote:
It means banks have joined the music industry in the "internet is a bad thing that makes people eat babies" club.

One might say so; it does seem an absurd penalty to either force cash flow through larger recognized firms for small businesses or increase revenue (through taxing) small businesses by requiring they be licensed/certified with the proper establishments before pursuing funding.

The Guardian explains it better (linked in the BBC article: http://www.theguardian.com/technology/2014/mar/06/crowdfunding-regulator-10-percent-rule)

It appears to be 10% of your assets, not 10% of your investments. I'd love to see their plan for policing this one, being as you just self-certify? Anyone familiar with the British financial system care to explain?!

 scarletsquig wrote:
Okay, so if I back a KS, I'm not allowed to use more than 10% of the total money that I have in my bank account?

If it did end up at that sort of level I'd think it would have to be 10% of your 'assets' and good luck figuring out what that number is

I suspect it's more geared towards crowdsourcing 'investement' things which suggest returns in cash rather than stuff terms

Look!
Up in the sky!
Is it a bird?
Is it a plane?

No! British Bureaucracy and Regulation Man are here to feth everything up again save the day! How we’d ever get on without those two heroes, always fighting for Health, Safety and the Nanny State way!

As far as I read this (and I am no expert in the field but have some understanding) it is in regards to UK pension funds and similar entities. I can't see how this would apply to individual 'investors', but again, not an expert on UK corporate/English Trust law. It could also be in relation to trusts.

It's not as if this type of cap is unusual at all. Crowdfunded campaigns would be classified as high-risk investments (there is no product being bought or invested in here so it would be difficult to justify the investment to the justify to The Pension Regulator.

I suspect that this was probably designed for things like http://www.seedrs.com/ which offer a proposed ROI and will have no practical application towards the more community and hobby oriented things that we see in the wargaming world.

It doesn't sound enforceable. And who is going to pay to enforce this... For the average Dakka poster you will have an extra tick box on the crowd funding website.... I think...

 Jadenim wrote:
The Guardian explains it better (linked in the BBC article: http://www.theguardian.com/technology/2014/mar/06/crowdfunding-regulator-10-percent-rule)

It appears to be 10% of your assets, not 10% of your investments. I'd love to see their plan for policing this one, being as you just self-certify? Anyone familiar with the British financial system care to explain?!

Many are hosted through a website platform such as Kickstarter, Indiegogo or RocketHub.

Investors and lenders often get rewards, linked to the amount they have pledged - such as badges, T-shirts, tickets, or whatever is being funded - as a thank-you for their support.

The FCA is now proposing that inexperienced investors will have to certify that they will not invest more than 10% of their portfolio in unlisted businesses.

http://www.theguardian.com/technology/2014/mar/06/crowdfunding-regulator-10-percent-rule

From 1 April, investment in the shares of crowdfunded companies will be restricted to savers advised by professionals, linked to corporate finance or venture capital firms, or those certified as sophisticated or high net worth. Savers who do not tick one of these boxes will have to sign a statement saying they will spend no more than 10% of their assets – excluding homes and pensions – on crowdfunding in any given year.

Barry James, founder of the Crowdfunding Centre, said the rule would lock ordinary investors out. “Make no mistake, the infamous 10% rule, however it’s dressed up, takes the crowd out of equity crowdfunding. Over the centuries Britain has led the world with inventions and innovations – and then thrown away that lead.”

It also talks about investing in shares... which miniature company has offered shares? Well apart from Wargames Factory... Lol!

This doesn't affect miniatures type KS at all they are classified as reward or prepayment type crowd funding which the new rules don't cover no effect to anyone here. The BBCs report is badly worded and or misleading when it refers to investor rewards out of context.

In the CP, we identified five main types of crowdfunding, noting that only firms engaged in the final two types will be within the FCA regulatory remit.

•Donation-based: people give money to enterprises or organisations whose activities or purchases they want to support.

•Pre-payment or rewards-based: people give money to receive a reward, service or product (such as tickets for an event, an innovative product, a download of an e-book or a new computer game).

•Exempt: people invest or lend money using organisations or investments that satisfy the requirements in statutory exemptions to be considered exempt from the need for FCA authorisation or regulation (such as Enterprise Schemes or withdrawable shares issued by Industrial and Provident Societies).

•Loan-based: people lend money to individuals or businesses in the hope of a financial return in the form of interest payments and a repayment of capital over time (this excludes some business-to-business loans

Investment-based: people invest directly or indirectly in new or established businesses by buying shares or debt securities, or units in an unregulated collective investment scheme

 H.B.M.C. wrote:
No! British Bureaucracy and Regulation Man are here to feth everything up again save the day! How we’d ever get on without those two heroes, always fighting for Health, Safety and the Nanny State way!

It's funny how everyone always loathes those kind of things up until they hit hard times and find themselves reliant on the state to survive from day to day. Or not, as the case may be.

Saxon wrote:It doesn't sound enforceable. And who is going to pay to enforce this... For the average Dakka poster you will have an extra tick box on the crowd funding website.... I think...

That was my first thought. What are they going to do, monitor every single person's bank accounts and transaction records to determine if anyone has invested more than 10% of their money in to a start up?

Agamemnon2 wrote:

 H.B.M.C. wrote:
No! British Bureaucracy and Regulation Man are here to feth everything up again save the day! How we’d ever get on without those two heroes, always fighting for Health, Safety and the Nanny State way!

It's funny how everyone always loathes those kind of things up until they hit hard times and find themselves reliant on the state to survive from day to day. Or not, as the case may be.

...what? "Oh I'm on hard times... I'm so glad the government won't let me invest more than 10% of my money in to a start up business!". Are people really that stupid? If you're on hard times, don't invest in start ups... do you really need the government telling you not to throw your money away?

Now, I think there should be regulation to help reduce legitimate scams, but this just seems like nanny state junk to me.

AllSeeingSkink wrote:
...what? "Oh I'm on hard times... I'm so glad the government won't let me invest more than 10% of my money in to a start up business!". Are people really that stupid? If you're on hard times, don't invest in start ups... do you really need the government telling you not to throw your money away?

There is absolutely no limit to human stupidity. A longterm membership of this or any other Internet forum should furnish one with copious object lessons of the fact.

It's a free market.

This means that big firms that feel threatened by Kickstarter are free to pay legislators to feth it up.

AllSeeingSkink wrote:
what? "Oh I'm on hard times... I'm so glad the government won't let me invest more than 10% of my money in to a start up business!". Are people really that stupid? If you're on hard times, don't invest in start ups... do you really need the government telling you not to throw your money away?

Now, I think there should be regulation to help reduce legitimate scams, but this just seems like nanny state junk to me.

I think it means that a fund manager can't invest more than 10% into crowdfunding, which seems like a good thing given how stupid the financial sector has been with other people's money, knowing the government will bail them out at taxpayer expense. Its more to protect our 401k's from some dumbass who knows he's got a golden parachute waiting no matter how badly he screws us, but really, REALLY wants to see that 400 foot tall statue of a Stormtrooper wrestling a bear.

This does not bode well for all those crowdfunding sites though, such as KS.

Because, if this is regulatory or law in GB, then this firmly places everyone participating in a KS in the "investor" bracket, whether those companies like it or not. Opens lawsuit opportunities up for projects that don't fund. It might also open KS and other crowd funding sites up to lawsuits. Very interesting.

Maybe someone will set up a Kickstarter to collect enough cash to pay off the right politicians to make this go away.

 scarletsquig wrote:
Okay, so if I back a KS, I'm not allowed to use more than 10% of the total money that I have in my bank account?

Apparently. There is the slight issue that Kickstarter isn't an investment platform... nowhere (to my knowledge) does the word 'invest' appear when you PLEDGE money to a kickstarter. On top of that, its an unenforceable regulation, you can pledge via credit card and then how will they ever know how much of your 'portfolio' is in kickstarter funding?

Besides that, what exactly would define your 'investment'? I have kickstarted lots of things, I have never invested in anything through kickstarter. The money I give to someone on kickstarter is (theoretically) returned to me in the form of product at some point down the line... so am I still 'invested' in a kickstarter after I get the goods that I pledged for? Does that stay in my 'investment portfolio' even though at that point I have zero interest in the company?

Total BS regulation, probably by someone who has no idea how it works and who has never used it.

From 1 April, investment in the shares of crowdfunded companies will be restricted to savers advised by professionals, linked to corporate finance or venture capital firms, or those certified as sophisticated or high net worth. Savers who do not tick one of these boxes will have to sign a statement saying they will spend no more than 10% of their assets – excluding homes and pensions – on crowdfunding in any given year.

See, that says shares... you dont get shares from a kickstarter, so is this for people who use kickstarter (in which case congratulations, that applies to pretty much nobody at all), or is this for people who are investing in crowdfunding companies like kickstarter directly?

As long as it doesn't mess with me getting new Mierce or Mantic stuff, we're golden.

Stop trying to take my toys away from me, silly politicians on both sides of the world!

chaos0xomega wrote:

 scarletsquig wrote:
Okay, so if I back a KS, I'm not allowed to use more than 10% of the total money that I have in my bank account?

Apparently. There is the slight issue that Kickstarter isn't an investment platform... nowhere (to my knowledge) does the word 'invest' appear when you PLEDGE money to a kickstarter. On top of that, its an unenforceable regulation, you can pledge via credit card and then how will they ever know how much of your 'portfolio' is in kickstarter funding?

Besides that, what exactly would define your 'investment'? I have kickstarted lots of things, I have never invested in anything through kickstarter. The money I give to someone on kickstarter is (theoretically) returned to me in the form of product at some point down the line... so am I still 'invested' in a kickstarter after I get the goods that I pledged for? Does that stay in my 'investment portfolio' even though at that point I have zero interest in the company?

Total BS regulation, probably by someone who has no idea how it works and who has never used it.

Eh, I think it has to do with people who are like:

Person A: I have an idea for a product and company launch! If I had 20k I could get the rest via crowdfunding and make into a company with a successful product!
Shark Tank: Awesome, here is 20k, I get 15% of all your profits from the post KS and future profits of the product!
Person A: Awesome!

1 year later:
Person A: Well, we kickstarted, after all the products were fulfilled, we were in the hole by about 10k. We are releasing our product to retail now.
SharkTank: Well gak, so there are zero KS profits and now I have to basically wait until you sell 50,000 widgets over 10 years to recoup my 20k investment, if that ever happens...

I also think it is to prevent people who have practically minimal money from losing their lifesavings in their OWN kickstarter. If you are running a Kickstarter and you are planing to or are investing your own capital, it can't be more than the %% or else you basically have someone declaring bankruptcy due to a KS. I think they simply want people to show they won't have to hang themselves in their basement should the KS fail. I know lots of KS have resulted in the project owner losing everything or simply saying 'screw it' and dropping the project and saying "you can't get blood from a stone".

I really don't think this is focused at our industry at all and the way miniatures companies are using crowdfunding compared to other companies. Not every KS do you expect to get a product for the value of your pledge.

 scarletsquig wrote:
Can someone cut through the jargon gak there and let us know what it actually means for the average UK-based KS backer?

It means that the Nanny State is alive and well and still telling you whats good for you, whether you like it or not.


They can't get tax revinue from it, so they are going for little joe the pledger, so they can .... get more monies. By telling little Joe how much he or she can spend.

Irony is funny like that.

Thanks for the clarity, lego and DaveC! Looks like this doesn't affect crowdfunding as it relates to wargaming at all.

 legoburner wrote:
I suspect that this was probably designed for things like http://www.seedrs.com/ which offer a proposed ROI and will have no practical application towards the more community and hobby oriented things that we see in the wargaming world.

 DaveC wrote:
This doesn't affect miniatures type KS at all they are classified as reward or prepayment type crowd funding which the new rules don't cover no effect to anyone here. The BBCs report is badly worded and or misleading when it refers to investor rewards out of context.

In the CP, we identified five main types of crowdfunding, noting that only firms engaged in the final two types will be within the FCA regulatory remit.

•Donation-based: people give money to enterprises or organisations whose activities or purchases they want to support.

•Pre-payment or rewards-based: people give money to receive a reward, service or product (such as tickets for an event, an innovative product, a download of an e-book or a new computer game).

•Exempt: people invest or lend money using organisations or investments that satisfy the requirements in statutory exemptions to be considered exempt from the need for FCA authorisation or regulation (such as Enterprise Schemes or withdrawable shares issued by Industrial and Provident Societies).

•Loan-based: people lend money to individuals or businesses in the hope of a financial return in the form of interest payments and a repayment of capital over time (this excludes some business-to-business loans

Investment-based: people invest directly or indirectly in new or established businesses by buying shares or debt securities, or units in an unregulated collective investment scheme