The crowdfunding world has started to suffer its first big failures, with Sustainable Power collapsing in June following allegations that claims made in its crowdfunding exercise in 2014 were exaggerated.

The question arises, are the current standards of due diligence required high enough and what can the Financial Conduct Authority (FCA) do to help the industry and protect consumers?

The current regime

There are very few obligations on companies seeking funding, whether that is from crowdfunding or raising equity by any other means, in respect of their disclosure and assuming that a formal FCA approved prospectus is required – these are very rare in crowdfunding.

It is important to remember that despite crowdfunding being fiercely fashionable and online, the rules relating to it are the same as for companies seeking to do things the ancient way, ie, as we may have done five or so years ago.