My Lords, I have no issues with the first of these SIs. It is another that deals with errors and omissions; I suspect we will see quite a number of them. I do have serious concerns about the second SI, but not with its content or the fact that we need it if we are to take the step of leaving with no deal. I want to understand what happens to the financial services industry as a consequence. Perhaps the Minister can help me with this. He will know that I have been involved, from the earliest days, with the development of fintechs in the UK. An example is crowdfunders, whether they are US ones that have created a core European subsidiary in the UK, or home-grown ones, of which we have quite a few. We have been a magnet particularly for young people across Europe with a tech and finance interest to come here and start their companies. Those companies have, essentially, been pan-European from the first breath that they took.
For example, under the e-commerce directive, a crowdfunder has been able to put up a project and seek investments through its online presence—the only way it exists—all across the UK plus the 27.
I understand from the SI that a crowdfunder based in the EEA will no longer be able to seek investments from UK investors unless it goes through the process of registering with the FCA and having its UK activities regulated by the FCA. I suspect that most will not bother. When you have 450 million people you can go to, going to an additional 65 million is probably not worth the effort. It is taking on the burden of an additional regulator just for a small part of the investor base you will be catching on to. If you do, you have only one regulator to deal with, and I assume that this is reciprocal. So if I am a UK-based crowdfunder, do I now have to go to the regulators in every one of the 27 and seek to become registered, certified or whatever else it is, to be able to continue to raise those funds? It is unusual for a crowdfunder based in the UK to raise most of its money in the UK. As I said, these have been pan-European from the day they took their first breath. They think that way, they are structured that way and their employees are designed in that way. Are we, in effect, hearing a death knell for crowdfunding and a whole series of related fintechs that are UK-based but have been reliant for building their investor or participant base from a pan-European, 500 million-person community? If there is this consequence then I am extremely concerned. Perhaps the Minister can explain; I may have it completely wrong.
After having some conversations I am quite concerned about a second point. Is the Minister clear that the UK companies that would find themselves trapped in this position are aware of it? Looking today at websites such as Seedrs or Crowdcube, there are hundreds of projects up on their systems seeking new investors. Those would presumably be grandfathered in this run-off programme, but dozens of new ones go up every single day. Do they understand that, in a week’s time, they may have to stop putting projects up in a way that can be accessed by a pan-European community? If not, are they in a position where they may be in breach and there may be serious repercussions as a consequence?
We are looking at an industry which many hold up as part of the fundamental future of financial services, an area the UK always considered itself a crucial leader in, and which we see as underpinning so much of our future prosperity. Can the Minister help me understand the consequences of what is about to happen?