PEER-TO-PEER lenders could be in for further scrutiny from the Financial Conduct Authority (FCA) after the collapse of FundingSecure exposed client money failures, compliance experts have warned.
It was revealed last week that it was unclear who was owed what in FundingSecure’s client money accounts and now Duff & Phelps claims the City watchdog will use incoming regulations to ensure it can show its teeth.
Mark Turner, managing director of compliance and regulatory consulting at Duff & Phelps, said the introduction of new regulations for P2P lenders as well as the new Senior Managers and Certification Regime (SMCR), means there will be higher expectations for both firms and individuals.
“Quite clearly, recent headlines highlight some questions the P2P sector need to answer, and fast,” Turner said.
“The industry and the FCA are going to see increased pressure from the public as investors lose money and risk that faith in the industry is lost for good.
“From a regulatory angle, recent headlines will undoubtedly increase the urgency at which the FCA might take action in an attempt to prevent investors losing more money.”
The new P2P rules, being introduced from 9 December, include the introduction of marketing restrictions and appropriateness tests as well as requirements for further transparency on rates, loan performance and anticipated defaults.
Under SMCR, it is the firm’s responsibility to ensure that senior managers, certified persons and other members of staff can carry out their roles effectively and in compliance with the regulation. This will involve ongoing training, and the implementation of new processes and internal systems.
“I don’t believe it’s a complete coincidence that the new SMCR and P2P lending regulations are both coming into effect on the same day,” Turner added.
“In two weeks, SMCR is going to fundamentally change the expectations on the management at P2P firms, with those managers being at risk of individual enforcement action where they are seen to have failed in their duties.
“P2P firms don’t have long to get their head around these new regulations. Firms that fail to do so can expect to feel the full force of the FCA, directed not just at the firms but also at the managers who run them.”