Tyrie writes to regulators over crowdfunding fears

Mark Sands
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Treasury committee chair Andrew Tyrie is worried that crowdfunding platforms do not face tough enough regulation (Source: Getty)

Treasury Committee chair Andrew Tyrie has raised fears of insufficient regulation around crowdfunding in letters to the chief executives of the Financial Conduct Authority and the Prudential Regulatory.

In letters dated 1 June, Tyrie has asked the regulators to question whether they are paying enough attention to the risks associated with the growth of peer-to-peer lending.

Crowdfunding has become a hugely popular way for businesses to raise cash, with campaigns launched for everything from challenger banks to cocktail bars.

However, Tyrie said that the regulators need to consider whether investors would benefit from stronger consumer regulation.

Read More: Should you invest in crowdfunding?

“Poorly informed investors may be left with a false sense of security about the balance of risks versus returns," Tyrie said.

"But greater regulation is not necessarily the answer. If this market can substantially increase competition it may offer benefits to the consumer. It is crucial that the regulator is doing what it can to find the right balance between these risks and opportunities.”

In particular, Tyrie asked acting FCA chief executive Tracey McDermott to lay out where responsibilities lie for ensuring that accurate information is conveyed to invesors through crowdfunding sites, and whether there are incentives in place for those platform to assess the creditworthiness of borrowers.

Similarly, the Treasury committee chair asked PRA chief executive Andrew Bailey for the regulator's assessment of the crowdfunding sector's resilience to potential economic shocks.

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