The Financial Conduct Authority has announced plans to regulate crowdfunding platforms in a similar way to other platforms to protect investors and consumers.

Yesterday, it published a consultation paper outlining its plans for regulating loan and investment-based crowdfunding platforms, including those offering social, ethicial and environmental investments. Donation-based crowdfunding platforms are unaffected.

The consultation says that investment-based platforms should only be marketed to “sophisticated investors, high net worth investors, retail clients who receive regulated investment advice or investment management services from an authorised person”. And that for non-advised clients, firms must assess whether it as an appropriate investment before allowing them to invest.

It also proposes the introduction of clearer explanations about loans, a 14-day cooling off period for both the borrower and lender to withdraw without penalty, and provisions to ensure that funders continue to receive repayments even if the platform collapses.

Christopher Woolard, the FCA’s director of policy, risk and research, said: “Consumers need to be clear on what they’re getting into and what the risks of crowdfunding are. Our rules provide this clarity and extra protection for consumers, balanced by a desire to ensure firms and individuals continue to have access to this innovative source of funding."

From 1 April 2014, the FCA will take over the regulation of the consumer credit market from the Office of Fair Trading and is seeking responses to the consultation by 19 December.