THE FINANCIAL Conduct Authority (FCA) will not grant full authorisation to all peer-to-peer lenders who have applied, industry experts have warned.
A number of leading lawyers and consultants, some of whom requested anonymity due to client confidentiality agreements, privately expressed to Peer-to-Peer Finance News that some of the UK’s largest platforms are unlikely to get the green light from the regulator in their current form.
This would be a major setback for the platforms, who need full FCA approval in order to apply to HMRC for ISA manager status. Once they have their ISA manager licence, they can offer the Innovative Finance ISAs – the tax-free wrapper set to propel the industry into the mainstream.
“I wouldn’t be surprised if some of the major platforms have to make amendments to their business models before receiving approval,” said one consultant.
“You can find you’re dropping over from one piece of regulation into other pieces of regulation.
“Some of the platforms were launched before 2014, when the sector was regulated by the Office of Fair Trading. They are still adhering to those regulations so they need to go back and look at their propositions again.”
The diversity and complexity of the platforms’ business models means that not all of them will fit into the FCA’s concept of P2P.
“I think the FCA’s biggest unmanageable concern is that the firms are not peer-to-peer lenders, but closer to a bank or a fund manager,” said Gillian Roche-Saunders, partner at law firm Bates Wells Braithwaite.
“It’s the more complex business models that are having a harder time getting regulated. It will take longer for them as the FCA will have to look at other parts of the business it wasn’t looking at before.”
Adding to the regulatory minefield is the fact that some of the platforms submitted their applications 12 months ago – the maximum time the FCA is meant to take to decide on applications.
“Platforms will have to decide whether to simplify their business model or take the time and wait for the FCA to fully understand their business,” said Roche-Saunders.
“My personal opinion is that a platform may be able to get away with an amendment if they’re seen as an asset manager, but they will need to do a whole new application if the FCA thinks they’re a deposit taker, as that is falling under the banking remit.”
The FCA has been contacted for comment.