FCA introduces new rules for P2P platforms

The FCA has confirmed new rules designed to prevent harm to investors in the P2P sector.

These rules have been devised to protect investors and allow firms and fundraisers to operate in a 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.”

Platforms will not be prevented from including information about specific investments in their marketing materials under the new rules.

The FCA will place a limit on investments in P2P agreements for retail customers new to the sector of 10% of investable assets, however, this will not apply to new retail customers who have received regulated financial advice.

Reacting to the news, Rhydian Lewis, CEO at RateSetter, said: “The limit on savers’ first investment is unnecessary and just patronises normal people.

“But the other aspects of the regulation mean savers can invest with confidence that P2P lending is particularly well regulated and here to stay.”

Matt Hopkins, head of fintech in the financial services team at BDO, added: “Smaller players may find it difficult to shift from mass marketing to only marketing to HNW or sophisticated investors, but if smaller players were generating significant volume from retail customers you have to question if the products were appropriate in the first place.”

The new rules will also include:

  • more explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise
  • strengthening rules on plans for the wind-down of P2P platforms if they fail
  • introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them
  • setting out the minimum information that P2P platforms need to provide to investors
  • applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other handbook requirements to P2P platforms that offer home finance products

The application of the MCOB applies with immediate effect, while P2P platforms have until 9th December 2019 to implement the other changes.

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