After two years of preparation and a year-long application process, Seedrs was authorised by the Financial Services Authority (FSA) this past Friday, 18 May. Our application had been approved in March, but now the final technicalities are all wrapped up. You can see our entry in the FSA Register by searching for Seedrs.
I want to say a word about why we see FSA authorisation as so critical, especially given that there are other platforms in the market that have been operating without it.
One of the main purposes of financial regulation in any country is to control the manner in which shares of companies are sold to the public. Participation in the capital markets by the masses is a good thing: it allows capital to be allocated to its most profitable uses, thereby creating growth and jobs for society and inflation-beating (and occasionally lifestyle-changing) returns for investors. But history is sadly replete with examples of unscrupulous promoters misleading unsuspecting investors into buying securities that they do not understand or that are not what they say on the tin.
Regulations are there to strike a balance between allowing markets to function freely while ensuring that everyone plays by an agreed set of rules. This balance serves not only to protect investors as individuals but also to maintain the integrity of the market so that investors participate in it—and allocate their capital to businesses that need it.
Seedrs provides a wide range of investors with the chance to invest in the shares of new businesses. In so doing, we sit squarely within the space that financial regulation is intended to address. We could have found loopholes to get around those regulations, as others have attempted to do, but that would have been inconsistent with the reasons those regulations are there. We therefore decided on day one that we would only launch if we could do so in a fully-compliant manner.
And, in our case, compliance meant FSA authorisation. The regulations in Britain are relatively straightforward: under the “general prohibition”, a company can only conduct any of a series of defined “regulated activities” if it is are authorised. The list of regulated activities clearly includes a number of the activities that we will be conducting. So for us to comply with the financial regulations, we needed be authorised—simple as that.
The authorisation process was long and sometimes painful, but we feel that it was an absolute necessity in order to satisfy both the letter and the spirit of the law. The FSA scrutinised every aspect of our business model and operations, and after over a year of iterative questions and answers, they gave us the go-ahead.
We are proud to be the first platform of our kind to receive FSA authorisation—or, to our knowledge, approval by a major financial regulator anywhere in the world. But more importantly, we are convinced that it was the right thing to do to go down this route, and we now look forward to launching the Seedrs platform as a fully authorised business.