A new era of regulated alternative investing is coming to Latvia.
Here is what the changes mean for investors.
The licence from the Latvian Financial and Capital Market Commission (FCMC) gives investors extra protections that they wouldn’t have previously had with P2P or alternative lending on the continent.
Investors will have up to €20,000 (£17.1m) of their invested money in any new regulated products protected if the platforms go bust.
The investor protections will only apply to the new regulated products.
Similar to the UK, as part of being regulated the platforms will need to ensure that investors pass suitability and appropriateness tests.
Investors will also have to be categorised as either a professional or retail client.
Mintos has already told investors they will need to pass these tests and verify their accounts by 19 September.
Both Twino and Mintos will also be able to launch other regulated products such as exchange traded funds (ETFs).
Roberts Lasovskis, chair of the board of Twino, said the platform will expand its product offering to European retail investors with financial instruments such as stocks, bonds, contract for differences and ETFs.
The platform said its main goal is to shift to a new operational model after a six month transition period where investments in loans are packaged in the form of regulated financial instruments called securities.
The current offering, where investors buy claim rights against the borrower through assignment agreements, will be replaced completely by investments in securities by the end of the transition period.
Mintos said it will offer regulated financial instruments known as notes through its platform rather than loans.
Expansion into new countries
The FCMC has granted licenses to Mintos and Twino that will let them operate across different countries within the European Union.
Twino said after an initial six months the licence will allow it to expand its product offering to retail investors on the continent.
“We will be passporting our investment services across the EU/EEA after the transition period and the receipt of the respective authorisation from the Financial and Capital Market Commission, while the place of business and the provision of our financial services will remain in Latvia,” Twino said.
Mintos has also said it will look to set up in different countries.
It seems the regulation revolution in Europe is just beginning.