Peer-to-peer lending platforms are worried that the City regulator’s proposals to strengthen rules surrounding financial promotions will lead to retail investors being pushed out of the sector.
The regulator is seeking views on whether more types of investments should be subject to marketing restrictions, what improvements could be made to risk warnings and whether there should be more requirements for these firms to monitor a financial promotion.
The FCA is inviting feedback on its discussion paper until 1 July 2021.
David Bradley-Ward, chief executive of Ablrate, is worried about retail investors being pushed out of P2P and said that his platform will be responding to the FCA.
Read more: How the FCA is tackling consumer investments
“My concern is the regulator is slowly creeping towards not letting retail investors do anything or to only invest in mass market products which would be a very big mistake,” he said.
“I see the need for protections and certainly the mini-bond situation could have been handled better but I don’t think throwing P2P into some high risk category is the correct way to go about it.
“They’re asking for feedback on questions on different aspects of financial promotions and we’re quite happy to give feedback, but reading between the lines it looks like they’re looking to increase restrictions, not just in P2P, but in all sorts of other things. It needs to be handled carefully and I’m sure lots of platforms will have feedback for it.”
Filip Karadaghi, chief executive of LandlordInvest, said he understands the reasons for introducing tougher restrictions after platform failures, but more onboarding rules would mean his platform may be forced to exit the retail space.
“I fully understand it and the common topic seems to be the failure of platforms, but the platforms are now of much better quality,” he said.
“We need to see what comes out of the proposals and discussions, retail is a small part for us but if there are any further onboarding requirements for retail customers, it would become uneconomical and we would have to look to move away from that market entirely.
“But we still don’t know what the rules will be. It’s pure speculation if it becomes too costly.”