ZOPA’S chief executive has said that proposed investor marketing restrictions are appropriate for platforms that offer riskier manual lending opportunities but not for them.
Jaidev Janardana (pictured) said that when an investor is lending against one property or one business, this could be riskier and “we need to make sure investors are sophisticated when they make these decisions”.
But Zopa offers investors a diversified pool of assets so “we do not think that marketing restrictions would be appropriate [for us],” he said at LendIt Fintech Europe conference in London.
Zopa has relayed this back to the Financial Conduct Authority (FCA), he added.
Peer-to-peer consumer lender Zopa, like the rest of the ‘big three’, does not offer a manual lending option, meaning that investors’ funds are automatically diversified across a portfolio of loans.
The City watchdog released its long-awaited post-implementation review of the sector in July, which included proposals to introduce categorisation and appropriateness tests for P2P investors. It suggested the restriction of platforms’ marketing activities to those who are certified as sophisticated or high-net-worth investors or those that certify that they will not invest more than 10 per cent of their net portfolio in P2P.
While Janardana is opposed to marketing restrictions at Zopa, he said he was “very supportive” of proposed appropriateness tests. This would ensure that investors understand that their capital is at risk, he said.
Even if marketing restrictions were implemented across the industry, Janardana said it would not actually impact Zopa in practice as the firm has never marketed itself to investors.
At a recent Peer-to-Peer Finance Association event, industry stakeholders were broadly in support of appropriateness tests. Their main area of concern was how those tests would be implemented in practice.
Some individuals mooted the possibility of tougher marketing restrictions on platforms offering manual lending.
However, others argued that diversification does not automatically equate to a less risky portfolio as it depends on the quality of the loans.