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FSA issues crowd funding warning

13 August 2012 at 16:09

FSA issues crowd funding warningThe risks associated with online investment schemes known as crowd funding have been highlighted by the Financial Services Authority (FSA).

According to the UK's financial regulator, the initiatives - through which groups of investors operate via the web to build up start-up capital to support either businesses or individuals - may be overly complex and high-risk, CityWire reports.

Only sophisticated investors should use the method, as they will have experience and an understanding of the risks related to valuing a start-up business, the FSA explained.

It stated: "Investors in a crowd fund have little or no protection if the business or project fails and that they will probably lose all their investment if it does."

And due to most of these funds being unauthorised, those who suffer financially as a result of taking up the approach will be unable to turn to the Financial Services Compensation Scheme or the Financial Ombudsman Service for assistance.

Posted by James Harrison



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