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FCA Regulations on Crowdfunding

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Questions and Answers

What change occurred in the U.S. crowdfunding landscape as a result of the JOBS Act in 2012?

Enforced strict rules allowing only high net-worth investors to invest in equity issues

Required crowdfunding sites to charge a commission for transactions

Allowed equity investment by non-qualified individuals (correct)

Barred U.S. crowdfunding sites from offering equity to investors

What type of investors are firms allowed to promote crowdfunding offers to under FCA regulations?

Experienced or sophisticated investors (correct)

Institutional investors only

Retail investors without any restrictions

Investors with a high net worth

Which platform emerged post the JOBS Act that charged fees based on the performance of the investment?

Kickstarter

Indiegogo

AngelList (correct)

SEC

What is the maximum amount individuals whose income or net worth is less than $107,000 can invest in crowdfunding-based equity?

$2,200 Signup and view all the answers

Which type of investors are Limited Partners (LP) in venture capital firms?

Institutional investors like pension funds Signup and view all the answers

What is the main function of Venture Capital Firms?

Invest in the private equity of young firms Signup and view all the answers

What is the maximum amount companies can raise through crowdfunding in any given year?

$5 million Signup and view all the answers

What is a key difference between donation and reward-based crowdfunding platforms and investment-based crowdfunding?

Investment-based crowdfunding is considered a high-risk investment activity, unlike donation and reward-based platforms. Signup and view all the answers

Why does the Financial Conduct Authority (FCA) recommend seeking more information about high-risk investments related to crowdfunding?

To educate investors about the risks involved in investment-based crowdfunding. Signup and view all the answers

Why does FCA regard investment-based crowdfunding as a high-risk investment activity?

Because most investments result in a 100% loss of capital due to start-up failures. Signup and view all the answers