INVESTMENT and savings trade body Tisa has published a guide to appropriateness tests for peer-to-peer lending platforms to help them comply with new investor marketing rules.
The guide advises P2P firms on how to identify appropriate investors and how to warn clients if a product may be inappropriate for them. It was created in response to the Financial Conduct Authority’s (FCA) updated regulations for the sector, which come into effect on 9 December.
Under the City watchdog’s new rules, P2P platforms will need to carry out an appropriateness assessment that considers a client’s knowledge and experience of the P2P investment before the platform can accept a subsequent instruction to invest. This is already a requirement for crowd bond providers and equity crowdfunding platforms.
Tisa’s guide advises platforms on when to issue the assessment test to new investors, how to define “complex” and “non-complex” investments, and what the appropriateness test should cover.
“These tests are set to place a significant burden on P2P platforms,” said Jeffrey Mushens, Tisa’s technical policy director. “Though the FCA has provided some useful guidance around how to develop the tests, ultimately it will be the responsibility of each platform to devise their own method of assessment in line with their business model.
“To ensure firms are properly equipped ahead of December, we have developed a guide with our members that puts the test into context, sets out example questions and aims to encourage industry good practice and common standards. This follows the model we pioneered to help firms meet their MiFID II appropriateness requirements providing much-needed clarity ahead of the introduction of new regulation.”
The guide was created by a Tisa working group, which included representatives from RateSetter and Goji. The working group also liaised with the FCA during the project.
“The rules and the test are not new. They already exist for many mainstream investments and the FCA is bringing P2P into that fold,” added Mario Lupori, chief investments officer at RateSetter and chair of Tisa’s working group.
“Tisa is experienced with these rules so it’s been great for the P2P sector to have their support. We feel these rules will be healthy for the sector and positive for customers.”
The P2P Appropriateness Guide is free to download on Tisa’s website.