Peer-to-peer lending platform and principal Rebuildingsociety has called on the Financial Conduct Authority (FCA) to collaborate with itself and other principals, amid a crack down on appointed representative (AR) permissions.
Earlier this month, the City watchdog proposed tougher rules for the oversight of ARs after seeing a “wide range of harm” and “real risks of consumers being misled and mis-sold”.
Since 26 February 2021, Rebuildingsociety’s ARs have been unable to do any new lending, after the FCA expressed concerns around the AR/principal structure for P2P platforms.
Rebuildingsociety’s managing director Daniel Rajkumar told Peer2Peer Finance News that the FCA approached them asking to check everything with its ARs and requested that the principal imposed a lending restriction on its ARs while it carried out its research.
Rajkumar said he hopes to have the ban removed after the consultation into ARs and principals has completed, and once the FCA looks at evidence that Rebuildingsociety has all the appropriate resources.
Rajkumar said that more awareness of the principal body is needed, and called on the FCA to work with them and other principal platforms. He added that a trade body for principals would be useful too.
“We’re hoping when the results of the consultation come through, the FCA recognises the principal/AR model is a suitable way of overseeing innovative financial services,” he said.
“In my view acting as a principal should be a permission itself. At the moment anyone authorised can become a principal, but a lot of work is there to be done to manage and control risks and manage ARs.
“We’re aware the regulator has concerns about principals and AR firms get more complaints but, in a way, they take full responsibility and have good controls over conduct and governance. In my view it can be a way of extending regulation in an operative manner for innovative financial services.
“If the regulator can work with industry to recognise this is an extension of regulation and can work well, especially around innovative financial services where it’s very high skilled and fast paced and can be demanding, I think it can work very well.”
“There could also be a trade association for principal firms,” he added. “This isn’t something the regulator can necessarily do but could be a key founder of such an association whereby they are promoting an amount of industry collaboration.
“Especially given the current shortage of skills at the FCA and they have recognised they have a shortage in skilled staff with experience of handling fintech, this is an opportunity for the FCA to collaborate with industry to facilitate industry supervision.”
Rajkumar added that he wants to see the FCA remove P2P from its list of high-risk investments, a concern many platforms have expressed.
“The FCA has a tendency to put innovative financial services on the list, that’s not being a progressive regular,” he said.
“If you want a progressive regulatory system you need to be more collaborative, I don’t feel there’s an appropriate amount of accountability with regulation at the FCA.”