UK financial watchdog cracks down on crowdfunding

Britain’s Financial Conduct Authority is keen to have a clearer boundary between crowdfunding and asset management. (Reuters)
Updated 10 December 2016

UK financial watchdog cracks down on crowdfunding

LONDON: Crowdfunding platforms that offer home loans should be regulated like mortgage lenders to improve safety and transparency for customers, Britain’s Financial Conduct Authority said.
Crowdfunding or “peer-to-peer” (P2P) operators collect small sums of money from many people online to lend to companies or individuals, or invest in bonds. The size of the market in Britain stood at 2.7 billion pounds ($3.40 billion) last year, up from 500 million pounds in 2013.
The watchdog’s recommendation was included in the results of a public consultation into rules it introduced in 2014, which it said needed tightening up because the market was changing rapidly.
“We plan to consult on additional rules in a number of areas,” the watchdog said.
“These include more prescriptive requirements on the content and timing of disclosures by both loan-based and investment-based crowdfunding platforms.”
Firms like Funding Circle, Zopa and Seedrs cut out banks by bringing together lenders and borrowers, or channelling investment into start-ups.
FCA CEO Andrew Bailey said not all platforms were being clear to customers about how they worked, with some “potentially misleading” in the way they presented their investment strategy or the role of reserve funds or provisions for loan defaults.
“It would be wrong to give investors the idea they would never lose money as a consequence of having a reserve fund,” said Bailey.
A core aim of new rules would be to have a clearer boundary between crowdfunding and asset management, he said.
The UK Crowdfunding Association, with many members from the investment side of the sector, said issues raised by the FCA highlighted the need for better enforcement of existing rules rather than new ones.
The watchdog is assessing applications for full authorizations from numerous platforms, a process that has thrown up many of the concerns it has identified.
To date, it has received 377 applications for licenses, with 16 platforms fully authorized, and of the 77 still being assessed, 36 have an interim license. Over 280 applications have been withdrawn.
“They got the wrong idea of what this is all about,” Bailey said.
Some in the sector have criticized the watchdog for being slow in authorizing firms, but Bailey said business models were continually changing, making it more time-consuming for the regulator to vet applications.
Christine Farnish, chair of P2PFA, an industry body, said it was not easy for a regulator to grapple with new market entrants when they are disrupting traditional business models.
“We trust that the critical consumer outcomes test — based on a balanced and evidence-based assessment of benefits and risks — will be applied as the review moves forward,” Farnish said.
The regulator said it would consult next year on additional rules to strengthen “wind-down” plans, additional requirements or restrictions on “cross-platform” investment, and extending mortgage-lending conduct standards to loan-based platforms that offer home loans.
The watchdog’s review found that in both loan and investment crowdfunding it was hard for investors to compare platforms, or compare crowdfunding with other asset classes.
Financial promotions were not always clear, fair and not misleading, and the “complex structures” of some firms created operational risks.
“It is difficult for investors to assess the risks and returns of investing on a platform,” it said.
The watchdog said it has “challenged” some firms to improve standards in handling customer money.


Afghan pomegranate growers squeezed as prices drop

Updated 28 min 32 sec ago

Afghan pomegranate growers squeezed as prices drop

  • Renowned for its reputed health benefits, the pomegranate is a point of pride for Afghan farmers
  • In Kandahar province, the prized crimson fruit could grow to the size of small melons

KANDAHAR, Afghanistan: Pomegranate farmers in southern Afghanistan — where growing the juicy fruit is an important alternative to opium poppy production — say they are feeling the squeeze this year, with business blemished by chilly weather, pests and export woes.

The prized crimson fruit, globally renowned for its reputed health benefits, is a point of pride for Afghan farmers, particularly in Kandahar province, where luscious pomegranates the size of small melons dangle from trees.

Every autumn, Afghans start drinking pomegranate juice as the fruit bursts into season. Vendors pile carts high with gravity-defying pomegranate pyramids and offer fresh-squeezed beverages.

Haji Abdul Manan, who has been growing fruit in southern Kandahar for about 30 years, said a springtime cold snap damaged pomegranate flowers, impacting about 40 percent of his crop.

Problems also came from “lice, flies and a fungal disease,” he added, likening a type of greenfly to a natural disaster that had ruined more than 100 of the orb-shaped fruits daily.

“It is the duty of the Afghan government to spray all the gardens in Kandahar and to protect the pomegranates from diseases, but the government is not doing anything,” Manan complained.

Apart from its sweet flavor, fans point to pomegranates’ purported health benefits including high levels of vitamin C and antioxidants that are said to help protect the body.

“Kandahar’s pomegranates are the world’s best for flavor, color, and several times Kandahar’s pomegranates came first in competitions abroad,” Nasrullah Zaheer, the head of Kandahar’s chamber of commerce, told AFP.

In Kandahar, a medium-sized pomegranate goes for the equivalent of about 15 US cents, but by the time the fruit reach Kabul they cost about three times that.

Zaheer and several other farmers claimed Pakistan has this year imposed hefty tariffs on pomegranate imports, which, despite a drop in yield in some parts of Afghanistan, has led to an oversupply in the domestic market and sharp price drops.

But the Pakistan Embassy in Kabul denied such a drastic measure had been taken, saying Pakistan had raised duties only slightly because “Afghan exporters consistently understate the value of pomegranates and fruits.”

Muhammad Hafeez, a fruit and vegetable seller at a market in Islamabad, said the pomegranate supply from Kandahar had not been impacted.

“The supply is in bulk and the quality is good,” Hafeez told AFP.

Abdul Baqi Beena, deputy director of the Kandahar chamber of commerce, said about 40,000 to 50,000 tons of pomegranates were exported annually, including to India, Pakistan, the UAE and Saudi Arabia.

For years, Afghanistan and international donors tried to wean farmers from growing opium poppies by encouraging alternatives such as fruit crops.

But those efforts often failed as drug smugglers offered lucrative prices that normally far exceed the income from traditional agriculture.

The US Agency for International Development previously supported the farming of high-value crops, including pomegranates, as an alternative to opium production, but in recent years has shifted its focus to helping build export markets and supporting Afghan farmers that way.

“There is strong regional demand for high-value Afghan products that generate sufficient profit to justify export cost,” Daniel Corle, USAID team lead for development outreach and communications, said in an email.

“These include pomegranates, pine nuts, apricots, spices, gems, marble, and carpets, among others.”