Prospectus reforms set to boost UK crowdfunding
UK crowdfunding has been given a boost, thanks to new legislation for platforms to raise capital amounts beyond the current prospectus threshold.
The Treasury has been working on reforming the UK’s prospectus regime, as part of its shake-up of the listing regime and broader financial services reforms.
It is proposing to raise the threshold below which public offers are exempt from the requirement to publish a prospectus, to £5m. The EU threshold stands at €8m (£6.8m).
Read more: Equity investment into UK small firms fell by 11pc last year
The prospectus reforms also include a new exception to permit offers of securities through a regulated platform, which the government refers to as “public offer platforms”, for larger raises.
“The changes would return the UK to the forefront of crowdfunding regulations,” said Bruce Davis, director of the UK Crowdfunding Association (UKCFA), an industry trade body.
“Large private firms would be able to raise large sums from private, unlisted firms.”
Davis highlighted the scale-up funding gap in the UK, calling the range from £5m to £30m a “no-man’s land” where it is not worth doing a full listed offer.
“Firms would normally go to the US, where there are deeper pools of private capital,” he added.
Read more: UKCFA’s 36h Group outlines strategy
“This new public offer platform allows medium enterprises to participate in crowdfunding.”
Davis said that the UKCFA supported the development of the policy by working with the Treasury, and is hoping to continue that dialogue with the Financial Conduct Authority to develop the rules and requirements for platforms applying for the new permission.
Davis also runs ethical crowd bonds platform Abundance, which he said would “hopefully” benefit from the new regime.
Read more: Regulation special report: Status: It’s complicated
“We would certainly look at applying,” he said.
It is thought that the application process will open up at the end of this year or the start of next year.
On 11 July, documents outlining the new prospectus regime were published, with any feedback requested by 21 August.
The documents also contain proposals to stop companies being able to raise finance through unregulated minibonds.