The figures were revealed by the FCA following a freedom of information request submitted by Bridging & Commercial.
The FCA informed B&C that around 15,000 firms were originally authorised to advise on peer-to-peer agreements.
Of those, a total of 3,555 firms have given up this permission by cancellation or variation of permissions from 1st April 2016 to the date of the FOI request (21st April 2017).
Firms that have cancelled their permission for advising on peer-to-peer agreements include two distinct groups:
• Those which were formerly authorised to carry out the activity, but then ceased to be regulated entities by cancelling their permissions
• Firms which were formerly authorised to advise on peer-to-peer agreements, but removed the activity by varying their permissions while remaining to be authorised by the FCA for other activities.
The FCA also revealed that there had been no cases in which it had cancelled a firm’s permission to advise on peer-to-peer agreements only.
This is because cancellation by the FCA involves cancelling all of a firm’s permissions.
The new regulated activity of advising on peer-to-peer agreements was introduced on 6th April 2016.
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At the time, firms which held permissions for the regulated activity of advising on investments automatically had their permissions varied to add the new regulated activity.
These firms did not have to pay additional FCA regulatory fees for holding the peer-to-peer advice permission, unless they earned income from that business.
Firms that did not undertake designated investment business were subject to an additional fee in relation to the Financial Ombudsman Service.
The FCA established permissions for advising on peer-to-peer agreements after the introduction of the Innovative Finance Isa was announced in the 2014 Budget, which allowed peer-to-peer lending agreements to be included within the Isa tax wrapper.
This meant that advising on peer-to-peer agreements would become a regulated activity.
"It’s interesting to see that approximately three-quarters have retained the permission for now," said Stephen Findlay, founder of BondMason.
"This signals a level of interest in the future."
Stephen felt there were a couple of key reasons why advisers may be slower to advise on the peer-to-peer space:
- It’s a growing and complex industry with lots of operating models and different lending opportunities and risks
- It's not clear that existing professional indemnity insurance would cover advising on peer-to-peer lending, so this needs to be clarified ahead of an adviser undertaking these activities.