European peer-to-peer lending platform Mintos plans to launch regulated financial instruments later this month, which will give its investors greater protection.
The platform, which secured its investment firm and electronic money institution licence last month, will begin issuing notes – with one set of notes corresponding to six to 20 loans.
Mintos said that the underlying loans in each cohort will have similar properties – they were issued by the same lending company in the same country, and they share the same loan type, interest rate, term range, and amount range. Investors will be able to see details of each loan and its repayment schedule.
The notes can only be bought by registered investors and can only be sold to other investors on the platform’s secondary market.
Read more: Mintos receives investment firm licence
Investors earn returns from the cashflows of the loans underlying the notes, Mintos said. When borrowers make repayments on any of the loans, the lending company makes a payment to the issuer, who then makes a payment to each noteholder on Mintos.
With the new, regulated products, Mintos investors will be protected by the MiFID II investor protection framework, Prospectus Regulation, Packaged retail investment and insurance products (PRIIPs), and Investor Protection Law.
Furthermore, lenders investing in Mintos notes will be protected by a national investor compensation scheme, so if Mintos fails to provide investment services, retail investors are entitled to a compensation of 90 per cent of the losses, up to a limit of €20,000 (£17,130).
However, the scheme does not compensate investors for losses resulting from changes in the price of an investment or borrower defaults.