The new office for those guilty of reckless misconduct

The new office for those guilty of reckless misconduct

Unless you’ve been avoiding the news recently, you’ll have heard about the recent report that was published by the Parliamentary Commission on Banking Standards, ”Changing Banking For The Good“. Granted, you may not have rushed to delve deep into the 500-odd page document when it was released last week, but I’m guessing that you might recall something about a new proposal to send bankers to jail for reckless misconduct. Such feel-good headlines do tend to shift newspaper copies after all.

Recommendations Or Reality?

Just like the ‘Kay Review of UK Equity Markets and Long-Term Decision Making’ that was published almost a year ago, it’s full of sensible recommendations and conclusions. As the press were quick to comment though (for example: herehere and here), the jury’s still out on whether the Banking Commission’s recommendations will actually see the light of day as hard regulations and successfully restrain those evil bankers that we hear so much about.

Before going any further, it’s important to be clear that ShareIn deals with equity funding, as opposed to debt. Yet there’s still plenty of interest in the Report, particularly for a business such as ours which wants to work with a legislative system that is continually developing in response to the growth of crowd-based activities. Ultimately, whether you’re focused on equity or debt solutions, we’re all working to make it easier for businesses to find available funding and it’s important for all of us that the system is as efficient as possible to ensure that the right businesses get the ‘right’ money.

Why Peer-To-Peer and Crowdfunding Solutions Are Important

The Report agrees and identifies the clear benefits for consumers of increasing the use of peer-to-peer (‘P2P’) and crowdfunding platforms. It even goes further at one point to state:

“This access should not be restricted to high net worth individuals but, subject to consumer protections, should be available for all” (Para. 350).  

This isn’t as straightforward as it sounds with the current regulations but it’s interesting to see the statement included in the Report. In addition, as someone who works within the industry, it’s always heartening to read an official report that stresses the importance of maintaining high standards whilst recognising the fact that maintaining consumer trust is paramount.

As a founding member of the UK Crowdfunding Association, we support a regulatory framework that is inclusive and enables people to make their own decision whether to invest providing they fully understand the risks involved.

…Regulation of alternative providers must be appropriate and proportionate and must not create regulatory barriers to entry or growth. The industry recognises that regulation can be of benefit to it, arguing for consumer protection based on transparency” (para 356)

In my view, anything that helps increase confidence and trust in crowd-based products and services has to be helpful.

Where To Go From Here?

Whilst the report may be predominantly focused on the banking sector, there are a few important points that are just as relevant to those outside the sector. Existing regulations need to develop to accommodate crowd-based funding business models – although that’s hardly front-page news. However, the biggest takeaway for me with respect to crowdfunding is this fantastic quote (I really couldn’t have put it better myself):-

“Peer-to-peer and crowdfunding platforms have the potential to improve the UK retail banking market as both a source of competition to mainstream banks as well as an alternative to them. Furthermore, it could bring important consumer benefits by increasing the range of asset classes to which consumers have access. This access should not be restricted to high net worth individuals but, subject to consumer protections, should be available to all. The emergence of such firms could increase competition and choice for lenders, borrowers, consumers and investors.”

After all, as I’ve previously mentioned, the benefits of improving access to funding for businesses ultimately help us all.


photo credit: decade_null via photopin cc

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