The FCA guidlines for equity crowdfunding state that it is the responsibility of the platforms NOT to present misleading information. But what does that mean?
Let me give you a recent example - this company is currently on Crowdcube trying to raise money.
So - the claim is that this company's product is stocked by the following national chains - Asda, Aldi, Morrisons, Ocado. Well that seems simple enough. Asda have 525 UK stores and Aldi have over 700. Ocado is online, whilst Morrisons have 500.
Having such a fantastic listing in national supermarkets, totalling over 1700 stores, is a very clear investment gold standard. It's dynamite.
Now you wouldnt expect that this company, which is only 3 years old, to be stocked by all of these stores. But given the fact they dont enlighten investors with more information, you would expect the listing to cover a good - for good maybe read sensible percentage of the UK coverage - number.
As it turns out, the company only stock these chains' Scottish stores. So that is about 5% of their total number. They are regional listings in a region with 6m inhabitants.
Strictly speaking the information given in the pitch is not wrong. But is it misleading? Well of course it is. Asda for example only have 20 Scottish stores. Investors might hope that this is exactly the sort of basic due diligence that the platform would carry out on their behalf. So the conversation might go - 'dont you think it would be fair to say that you have regional listings in these stores for Scotland only?' Actually you and I couldnt possibly find out that they are only in Scottish stores, unless the stores or the company told us - we tried the latter. They said it wasnt misleading at all! They said that they never mentioned how many stores the listings covered!! Wonder why?
There is only one plausible explanation for omitting this information - it helps make the pitch more attractive. Isnt that the definition of misleading - something that informs but in a way that doesnt tell you the whole truth? It misleads you.
When investors have to fight to get the right basic information to make a sensible investment decision, surely it is time for the FCA to do its job.