The Financial Conduct Authority (FCA)’s interim feedback on its review into crowdfunding indicated tougher regulation ahead. Here’s some of the P2P industry’s initial thoughts.
James Meekings, Funding Circle’s co-founder and UK managing director
“We welcome the FCA’s review and support the focus on investor protection. Platforms must fully disclose information about risk and returns which is why Funding Circle publishes performance data on every single loan. Investors have now lent £1.8bn to small businesses through the Funding Circle platform, supporting the creation of 40,000 new jobs.”
“We are happy that the FCA is applying rigorous standards to the whole industry: as a founding member of the P2P Finance Association, we have worked to set high levels of disclosure and transparency which are unmatched elsewhere in financial services. We’ll continue to work with the FCA to ensure that our market works in the interest of investors and borrowers”.
Julian Cork, chief operating officer of Landbay
“Crowdfunding is a broad church, with a rapidly growing congregation; but the umbrella term is being used to describe an increasingly wide range of financial products…This blurred distinction risks misleading consumers, so it’s imperative that more is done to educate potential investors on the sector’s parameters, so it is clear it is for investment, not for savings.
“We would encourage clearer definitions of the different types of crowdfunding, particularly between the equity and debt varieties…Furthermore, we support the call for greater transparency in the market, which is why we are already publishing our lending criteria and statistics on our website.”
Christine Farnish, chair of the P2PFA
“In any dynamic market regulators need to keep the regulatory regime under close review. We are pleased, therefore, that the FCA has undertaken this sector-wide review at this time.
“The critical test for any review of this sort is whether the sector is, overall, delivering beneficial outcomes for investors and borrowers. It is not easy for a regulator to grapple with new market entrants, especially when they are disrupting traditional business models and challenging powerful incumbents. We trust that the critical consumer outcomes test – based on a balanced and evidence-based assessment of benefits and risks – will be applied as the review moves forward.”
Stuart Law, chief executive of Assetz Capital
“We can see that there are several areas that interest the FCA and we could see regulatory changes applied to those next year. The industry has performed well overall so far and we see this review as mainly fine tuning the regulations to avoid perceived risk areas becoming more significant in the future. There was however one fairly strong pointer in 1.14 that perhaps some firms are not thought able to reach the threshold conditions for full authorisation and the FCA is concerned about what happens if those firms are refused permission to trade. Hopefully it will not come to that.”
Tarlochan Garcha, chief executive of property P2P lender Kuflink
“The FCA is laying the foundations for an industry on the cusp of making it mainstream. It’s obvious that protection for investors should be at the heart of all peer-to-peer platforms.
“Misleading promotions which could result in investors not fully knowing the risks associated with lending are becoming increasingly visible due to soaring competition.
“Peer-to-peer lenders must ensure investor protection is their priority by providing comprehensive wind down agreements, by setting out their own additional capital and applying a very prudent lending policy for borrowers.”