ISE wants crowdfunding regulated

The Government has been urged to introduce regulation for crowdfunding to provide protection for potential investors and help facilitate the development of a new financing model for businesses.

The Irish Stock Exchange (ISE) has called for a regulatory framework to be developed for what is becoming an important source of alternative funding for certain types of smaller companies.

The ISE’s head of regulation, Daryl Byrne said: “As a number of European countries have introduced and others are considering introducing domestic regulatory regimes for crowdfunding, we consider that it is important for Ireland to meet best international practice and have a regulatory regime in place for crowdfunding.”

In a submission to the Department of Finance, the ISE said regulation should be proportionate in balancing capital access for smaller growing businesses with appropriate levels of protection for investors.

The Institute of Directors (IoD) warned the current absence of regulation posed a substantial risk to potential investors and increased the opportunity for bad practice.

“It ultimately could create serious reputational damage for this relatively new funding model in Ireland,” said IoD chief executive, Maura Quinn.

However, Ms Quinn said that any regulation should not have “a chilling effect” on crowdfunding as its use as a finance model was still developing.

At a minimum the IoD said investors should be assured of basic standards with regard to the quality and accuracy of information provided on platforms seeking investors as well as a complaints mechanism.

Ms Quinn said there was a clear distinction between financial return crowdfunding and other types where there was no expectation of financial gain. She pointed out crowdfunding comes under the category of shadow banking, almost a third of which was subject to little or no regulation, despite €2 trillion worth of shadow banking assets being held in Ireland.

Linked Finance, the country’s largest peer-to-peer lender, said regulation would provide greater protection to consumers and raise awareness of the sector.

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