Crowdfunding: are you ready for the new rules from 1 April 2014?

Crowdfunding: are you ready for the new rules from 1 April 2014?

Crowdfunding: a concept so achingly trendy is it now one word. One word! That's the way the modern world rolls, folks.

As it happens, the word hasn't quite made it to the Oxford English Dictionary (yet) but it has nonetheless piqued the interest of the regulatory authorities such as the Financial Conduct Authority (FCA). As a result, the FCA published its new rules on this new method of funding yesterday.

If you are a business that is looking to be invested in by crowdfunders or you are a crowdfunding organisation, then these new rules will be of interest to you.

So, let's get straight into it. What is crowdfunding all about?

The FCA describes it as follows:

Crowdfunding is a way in which people, organisations and businesses (including business start-ups) can raise money through online portals (crowdfunding platforms) to finance or re-finance their activities and enterprises. 

The concept has become increasing popular in recent years for many reasons. Advances in technology (such as the creation of online platforms) have facilitated the creation of crowdsourcing sites and, more importantly perhaps, banks and other traditional lenders have not being willing or able to lend like they used to prior to the financial crisis.

Given the increase in this type of fund-raising last year alone (see the graph below) it is little wonder that t

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