FCA introduces fresh P2P rules

Michael Lloyd

June 5, 2019

Following consultation, the Financial Conduct Authority (FCA) has introduced rules designed to prevent harm to investors, without stifling innovation in the peer-to-peer (P2P) sector.

These rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities.

“For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”

In particular, additional guidance has been provided to make it clear that platforms will not be prevented from including information about specific investments in their marketing materials.

As originally proposed, the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10% of investable assets. The regulator said this is an important means of ensuring that they do not over-expose themselves to risk.

The investment restriction will not apply to new retail customers who have received regulated financial advice.

The rules cover more explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.

The FCA has strengthened rules on plans for the wind-down of P2P platforms if they fail.

It has introduced a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.

The rules also cover setting out the minimum information that P2P platforms need to provide to investors.

Furthermore, the rules cover applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

P2P platforms need to implement these changes by 9 December 2019, except for the application of MCOB, which applies with immediate effect.


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