The FCA has recently published a letter that applies to firms that operate loan-based crowdfunding platforms, to warn them that their lending activities could be a breach of FSMA and may be a criminal offence.

Applicable firms

It warns that any firm who lends money that has been borrowed from crowdfunding activities, is ‘accepting deposits’ within the meaning of Article 5 of FSMA (Regulated Activities Order) 2001, and where that firm does not have the necessary regulatory permission to carry out this regulated activity, that firm is breaching FCA expectations for regulated firms and is at risk of committing a criminal offence.

The FCA notes that any exclusions to the requirement to have regulatory permission are very unlikely to apply to such firms, as exclusions are only applicable to firms that accept deposits infrequently.

Actions for firms

The FCA expects firms to take the following actions:

  1. identify whether your firm has lent money to any firms that do not have the regulatory permission to accept deposits;
  2. stop facilitating the acceptance of deposits by these firms;
  3. consider what action you need to take in the future to ensure that you do not accept deposits by such firms;
  4. consider what action you need to take where a firm has already been accepting deposits and does not hold regulatory permission to do so.

Next steps

The FCA is requesting that firms contact them with details of their responses to the above actions by 14 March 2017.

To respond to the FCA, please email:

To access the letter in full, please click here.

For more information, and any guidance or advice on FCA expectations, Cleveland & Co, your External in-house counsel, are here to help.