Propio leaves mini-bonds market for P2P
Propio is becoming an appointed representative (AR) of Rebuildingsociety, as part of its plans to ditch mini-bonds in favour of peer-to-peer lending.
The platform, which diversifies investments across residential mortgages, bridging and development finance, has already stopped offering new mini-bonds, with a view to entering the P2P lending market in May or June this year.
Propio is in the midst of a fundraising round and revealed that it has found a backer supportive of its new strategy.
Rebuildingsociety is a fully authorised P2P lender. As an AR, it will conduct all of the compliance and oversight needed and speak to the regulator on behalf of Propio.
Propio decided to move away from mini-bonds after the Financial Conduct Authority (FCA) implemented a temporary marketing restriction for restricted investors, following the high-profile collapse of another provider, London Capital & Finance.
“Our mission was around democratising property-based investing and whilst we understand why the regulator was doing this, it imposed quite a challenge for us in that we have quite a few restricted investors who like investing with us and have done so, in some cases, for a number of years,” said Tom Buttress, co-founder and chief executive of Propio.
“We know there’s demand for property loan-based investments so we took the decision to explore other avenues to get to market and we believe the best approach now for us is to pivot our legal and regulatory structure from a bond-focused business to a P2P lending business.
“It’s not a massive or completely crazy change, it’s just one that takes time to implement going through various FCA AR authorisation steps.
“We also have to change a number of the legal documents on our platform but ultimately we can still utilise a lot of our business processes and the technology we have built over the past few years to deliver a really solid P2P loan-based investment product.
“And we have some innovative and exciting origination channels planned which we believe will remain attractive investment opportunities despite the impact from the coronavirus.”
Alongside its historic bond-based investment, Propio has been offering an Innovative Finance ISA, which will continue to be a part of its proposition.
Buttress said much of the work that’s required to become an AR, such as writing policies and making technical and legal changes, can be conducted working from home during the lockdown.
Read more: Propio to launch property IFISA
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“We’re excited to have Propio on board as our fourth AR and hope to have them on the FCA register within eight weeks,” said Daniel Rajkumar, founder and managing director of Rebuildingsociety.
“We support the FCA’s decision to temporarily restrict financial promotions of the IFISA to the mini-bond market.
“The improved transparency that exists with P2P helps lenders to better understand the underlying assets and risks associated and can give more granular choice and control than with some mini-bond investors.
“Many firms have felt the effect of the post implementation review and how the FCA has raised the bar for the industry.
“Partnerships like the AR and principal relationships offer a more efficient way for firms to adopt industry best practice, while saving costs of meeting the new, higher standards. ”
