The UK’s Financial Conduct Authority (FCA) has released the new rules for the peer-to-peer sector, in a bid to better protect investors while not hindering the ecosystem.
Last year, the regulator proposed new regulations to the space, including the implementation of proposals to ensure investors receive clear and accurate information’ on potential investments with clear indication on risks. The regulator stated it is committed to continue reviewing the sector as it evolved and adjust rules accordingly.
Its new rules aim to protect investors and allow firms and fundraisers operate on the long-term and in a sustainable manner.
The FCA has refined its proposals and reaffirmed that platforms are not prevented from including information about specific investments within their marketing material.
As originally proposed, the regulator will be placing a limit on investment in P2P agreements for retail customers new to the space. This is being set at 10 per cent of investable assets. Decisions to do this came as a way to safeguard consumers from over-exposing themselves to risks.
This rule does not apply to new retail customers who have received regulated financial advice.
Another change is more explicit requirements to clarify what governance arrangements, systems and controls platforms must have to support the outcomes they advertise. A particular focus has been put on credit risk assessment, risk management and fair valuation practices.
Other new rules cover the strengthening of plans for the wind-down of P2P platforms if they fail, and a new requirement for platforms assessing investors’ knowledge and experience of P2P investments where no advice has been given.
The FCA has made changes to the setting of minimum information a P2P platform needs to give investors.
Finally, the new rules cover applications for mortgage and home finance conduct of business (MCOB) sourcebook and other handbook requirements to P2P platforms that offer home finance products where at least one investor is not an authorised home finance provider.
The changes outlined need to be implemented by 9 December 2019, except for the application of MCOB, which takes immediate effect.
FCA executive director of strategy and competition Christopher Woolard, said, “These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”
The company will continue to monitor the P2P and crowdfunding space and make changes accordingly.
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