Central Bank warns on crowd-funding
THE Central Bank is to warn investors that crowd-funding and peer-to-peer lending is not regulated and is high risk.
Crowd-funding, including peer-to-peer lending, involves lending money to, or investing in, a company or project.
Low interest rates being paid on deposits has led to huge growth in this type of investing, with the promise of returns of as much as 15pc on your money.
But the Irish Independent has learned that the Central Bank will today warn that crowd-funding, and peer-to-peer lending, is not regulated in this country. This means that the Central Bank's codes of conduct and protections do not apply to crowd-funding platforms.
Client asset rules do not apply, and the State deposit guarantee scheme and the Investor Compensation Fund do not cover crowd-funding schemes.
And the financial services ombudsman process does not apply in complaints about crowd-funding, and peer-to-peer lending.
Crowd-funding experts predict strong growth in Ireland, with new platforms for bringing investors and companies together cropping up regularly. The European Central Bank has prompted the idea, especially as a way to fund start-ups.
It is a way money can be raised from a large number of people or organisations to fund a business idea, or a project. This is usually done through a web-based platform.
Sometimes the funds are lent to the company. There are also equity-based models, where an investment is made in return for a share of the profits.
But the Central Bank is set to warn that investors risk losing some, or even all, of their money. And even if the business being invested in succeeds, the return could be less than expected.