- Andrew Bailey rules out any leeway on compliance
- Defends 10 per cent rule
- Blasts Facebook and Google on promotion of fraudulent investments
FINANCIAL Conduct Authority chief Andrew Bailey has ruled out “best endeavour” as a defence against non-compliance with the new peer-to-peer lending rules that come into effect next month.
Some industry insiders had speculated that there might be some leeway for P2P firms complying with the new regulations, due to the relatively short time frame from when they were announced.
When asked this question by Peer2Peer Finance News, Bailey (pictured) said “I’m afraid not”, adding that the FCA had consulted a lot on this issue.
The new regulations include investor marketing restrictions designed to protect consumers. From 9 December, P2P platforms will be limited to marketing themselves to high-net-worth and sophisticated investors, those receiving regulated financial advice and everyday investors who pledge not to put more than 10 per cent of their portfolio in P2P loans.
With regard to the so-called 10 per cent rule, Bailey said that he knows the P2P industry “hasn’t been happy with concentration [rules]” but added, “I do think that it’s sensible risk management”.
The FCA on Tuesday announced a ban on mass-marketing of mini-bonds, following the collapse of London Capital & Finance this year that left thousands of everyday investors out of pocket.
Bailey said that the FCA “had made a lot of progress on some fronts and not as much as we wanted to on others”, when it came to regulation of the mini-bond sector.
He noted the FCA’s work in supervision of promotions but criticised tech behemoths Facebook and Google for insufficient progress in helping to protect consumers from fraudulent promotions.
“If we demonstrate something is highly likely to be fraudulent, we want them to take it down promptly,” Bailey said. “We’re not seeing that happen.”
Bailey went on to say that fraudulent financial promotions should be incorporated into the government’s Online Harms bill, which aims to protect consumers from a range of issues such as child sex abuse, hate crimes, cyber-bullying and disinformation.
The FCA’s announcement also revealed that it intends to launch a communications campaign to improve consumer awareness of risks and to inform consumers about what they should consider before investing in high-risk investments.
The FCA warned about “high-risk” Innovative Finance ISAs last April, raising the question of whether P2P lending would be included in the communications campaign.
“At this stage I wouldn’t envisage that,” Bailey told Peer2Peer Finance News.
Bailey said that mini-bonds and P2P loans “are very different instruments and it’s important to keep them separate.
“We’re acting against complex and opaque mini-bonds where money is lent and then on-lent to other investments,” he added.
“Does the investor understand what they’re funding and what security they have? Often not enough and none [respectively].
“One area for the P2P industry to keep itself identifiably different is in the transparency of the P2P contract. It’s very clear that it’s a one-to-one contract.
“The investor can observe the performance of the borrower and it’s clear what security they have.”