Crowdfunding is a way in which people and businesses try to raise money from the public, to support a business, project, campaign or individual.
The term applies to several internet-based business models. Loan-based and investment-based crowdfunding is regulated by the Financial Conduct Authority (FCA). The technical aspects of non-broadcast advertising for such companies are subject to statutory control by the FCA. However as with other financial ads, the Committee of Advertising Practice (CAP) Code does regulate “non-technical” aspects of ads for these companies, such as matters relating to offence, social responsibility, superiority claims, fear and distress, competitor denigration and claims that do not relate to specific characteristics of the product.
Ads for donation and rewards based crowdfunding, where people give money to enterprises or organisations whose activities they want to support, sometimes in return for a reward, service or product, are regulated by the Advertising Standards Authority (ASA).
Individuals or companies seeking donations should be aware that claims made on their pages on crowdfunding websites constitute advertising and are subject to the Code. In 2014 the ASA upheld a complaint about company offering protective underwear on Indigogo because the advertisers were unable to support efficacy claims for the product (Wireless Armour Ltd, 13 August 2014).
Note: This advice is given by the CAP Executive about non-broadcast advertising. It does not constitute legal advice. It does not bind CAP, CAP advisory panels or the ASA. CAP’s Advice Online entries provide guidance on interpreting the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing.
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