DBS

45 the knowledge or experience to understand the risks involved in the investment 95 . We found various different FCA statuses listed on the DBS websites we have uncovered. “We anticipate a real flight to quality as the alternative finance sector moves into the main stream.” – James Cranmer, Triple Point “We feel the FCA should acknowledge the success of the existing rules in investment crowdfunding both in ensuring investors understand the risks and the way new investors are given additional protections through the appropriateness test and restricted retail investor status compared to traditional models of retail investment.” – UK Crowdfunding Association DBS PLATFORMS AND THEIR FCA STATUS Whilst individual companies issuing a one-off DBS do not require any FCA permissions to issue and self-promote their own DBS, and therefore FSCS investment protection is not available to them, platforms which offer debt based securities must have the relevant FCA permissions. This is because the promotion and sale of securities are regulated activities. In addition, DBS issues which are not associated with an FCA authorised platform cannot be held within an IFISA. Whilst some platforms take advantage of FSMA 2000 exemptions where certain activities are concerned, if advisers cannot find information about the FCA authorisation that applies to the platform and the materials it publishes in relation to DBS opportunities on its site, alarm bells should start to ring. In fact, we found 10 websites in the first two pages of a Google search for loan note investments, offering loan notes which have no references to FCA authorisation (some actually state that they are not required to be FCA authorised as the investments listed are property related – this is not the case for DBS which are securities, unless the offer gives limited information and does not specify how to respond) and appear to be unregulated sales agents. We do not consider these to be authentic platforms and it’s our feeling that the close correlation of property and loan note investments has attracted some of the less aware/unscrupulous elements from that industry. This is particularly pertinent since the FCA stated in December 2016 that not all firms satisfied the requirements to conduct an appropriateness test to assess whether investors have FCA STATUSES OF DBS PLATFORMS FCA AUTHORISED WEB APPROVED BUT NO INFO RE AUTHORISATION APPOINTED REP NO FCA AUTHORISATION NO REQUIREMENT TO BE AUTHORISED NO INFO RE FCA AUTHORISATION STATUS SOURCE: CROWDSURFER AND IP The graphic shows that just over three quarters of the platforms are either FCA authorised themselves or are covered by the FCA authorisation of another company as appointed representatives. However, this leaves a quarter of platforms with an FCA authorisation status that requires advisers to do further checking and this lack of clarity is a potential red flag.