UKIE issues report on crowd funding

The association for UK Interactive Entertainment has issued a report to the government today, calling for changes to current laws controlling crowd funding.

Crowd funding, the sourcing of funds from a large number of public investors, has gained a good deal of public attention in recent weeks due to Tim Schafer’s Double Fine Adventure raising over $1m in under a day in donated funds via Kickstarter, and which has now reached the $1.9m mark.

The report advises that the UK lessen restrictions on crowd funding in order to open up capital and fund creative enterprise. Pointing to the US as a model for innovation in this sphere, UKIE cautions that the UK must take action to remain competitive in the interactive entertainment industry.

UKIE believes that the UK regulatory regime should adopt a ‘light touch’ as regards to crowd funding, and is particularly interested in opening up legislation that would enable crowd funding to take a collective investment scheme model.

The CIS model is one of four identified by UKIE as potential platforms for crowd funding: donation, loans, securities, and investment, or CIS.

Donations are currently the dominant form of crowd funding in the UK and abroad, and is the model adopted by the U.S. based Kickstarter. In this model funders give money for either no reward, or for no-cash incentives like a poster, t-shirt, or dinner.

The loan model allows investors to give money and recieve a financial return with interest. There is little preventing this model from functioning in the UK as long as there is no provision of consumer credit.

The securities model rewards investors with shares in the venture being funded. This model is not generally permitted under the current regulatory regime.

The CIS model treats the funding activity as a collective, with investors recieving a return not based on issued shares. This model is not currently permitted by UK regulation, but the report calls for these restrictions to be removed.

These changes, the report says, will not require a dramatic overhaul of current regulation. In addition, the requested changes involve no cost to Her Majesty’s Treasury.