On 17 June 2014, the Irish Central Bank issued a Consumer Notice in relation to the regulatory framework for Crowdfunding, including Peer to Peer lending, in Ireland.
This website relates solely to equity crowdfunding, so we will limit our remarks to that.
In essence, crowdfunding, in all of its forms – equity, donation, rewards – is not a regulated activity in Ireland. This also applies to Peer to Peer lending. There are a number of Peer to Peer lending companies operating in Ireland and the Central Bank notes that this “is the only form of crowdfunding to have an established presence in Ireland.”
The absence of such a regulatory framework for companies operating in this environment exposes Irish consumers who contribute money to campaigns of this nature to certain risks that consumers in the UK, where the industry is regulated, are not exposed to.
Specifically, clients do not enjoy the protection of segregated funds in Ireland as Crowdfunding platforms are not required to comply with client asset rules. Additionally, Complaints in relation to crowdfunding cannot be made to the Financial Services Ombudsman (FSO) as the FSO only deals with complaints in relation to a regulated firm.
Although crowdfunding campaigns typically only last for 30-40 days, and hence investors would not leave monies on deposit with the crowdfunding company for a long period of time, subscribers in Ireland are advised to bear the risks of this exposure in mind before contributing to a campaign.
We note that the Central Bank of Ireland is actively monitoring developments in this area and will continue to work closely with other European authorities in this regard. If a vibrant equity crowdfunding market emerges in Ireland we believe it will be only a matter of time before the regulatory framework here is harmonised with the framework in the UK and the other European countries.