Despite regulation being positive overall for the sector, the new rules on retail investors in the peer-to-peer space are undemocratic, Max Lehrain, managing director of Relendex has claimed.
Rules from the Financial Conduct Authority (FCA) mean that P2P platforms can’t market to retail investors anymore.
“We can’t market to the general public, only high net worth or qualified investors so our access to that community has been restricted,” Lehrain said.
“On a philosophical level I’m somewhat disappointed because it’s saying the public needs to be protected from themselves which I find undemocratic.
“I’m somewhat sad about it because both P2P and crowdfunding is meant to be a move to democratise savings.
“Democracy should not be selective, otherwise it’s not democracy.”
Lehrain, who has been a compliance officer under most regulatory regimes since 2002, said that regulation overall is positive and needed and the problems stem from a fear of regulating in the wrong places.
“Regulation overall is a good thing, but the difficulty is it creates fear and concern in business managers that are not intimately familiar with the financial services market and how it works internationally,” he said.
“I think the intention is right, whether they always shoot the right chicken could be explored but I think it’s probably better that regulation is here because otherwise you’d have far more situations like London Capital & Finance.”
Lehrain said that although the new regulation has not affected business levels at Relendex, he suspects that the platform and others too, will take fewer investments from retail investors over time.
Last year the property P2P platform did not reach its ambition of £100m lending for the year because of Brexit uncertainty.
“We didn’t because we run the business in such a way that it is profitable,” Lehrain said.
“That was an ambition that we could write that amount of money and we might do this year but last year turned out to be a very strange year for political reasons.
“I gave that number out a long time ago before the whole Brexit thing really got run along.
“In the last half of last year everybody was sitting on their hands, people were not making decisions to do anything, even on a personal level, people were thinking about what’s going to happen to property prices.
“It was consequently a good year but that’s because we run a good business.
“There’s a level of disappointment but when you’re running a business that’s making money the rate of growth can be affected by external forces.”
Lehrain said that with the coronavirus being another unknown, 2020 could prove to be another strange year.
He said that the difficulty is not necessarily the condition itself but the fear of the condition and public, corporate and government reaction.
“I don’t think it’ll happen here, but I think in many countries around the world it could engender a recession, in Italy certainly,” Lehrain said.
However, he said that with the US’s Federal Reserve cutting the federal funds rate by 0.5 per cent and speculation of the UK’s Bank of England slashing interest rates, Relendex is in a good position, offering investors higher returns.
Read more: Behind the returns
“At the moment I think Relendex has a very good chance of doing quite well out of the current circumstances,” said Lehrain.
“I think we’re financially robust, imaginative and well placed to take advantage of the upcoming market situation.
“In relative terms, the returns we’re able to provide with a relatively high level of security are attractive and become increasingly attractive.
“I think there will be other failures in the marketplace lending arena, and I think that those that come through it will do well.”