ptr120
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Post by ptr120 on Apr 5, 2022 9:29:40 GMT
As per the email update just received, due to a dispute with the FCA.
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ilmoro
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Post by ilmoro on Apr 5, 2022 10:24:36 GMT
I find this baffling & worrying. The Ablrate description of how the SM works, repayment & issue of a new loan, is the same for nearly every platform. Its deliberately done that way AIUI to make loans simple debts rather than securities. I wonder if there is something more to this. One thing that immediately leaps to mind is the regulatory requirement (COBS 18.12 for the revaluation of capital & reassessment of risk profile when loans are distressed, defaulted or in recovery. Think AC. This is something that ISTM Ablrate doesnt do ... there is no clear risk framework & no revaluation of the likely return on defaulted etc loans
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dh1
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Post by dh1 on Apr 5, 2022 10:41:22 GMT
I do too, ilmoro. At least Ablrate aren't shutting the thing until Friday. Looks like they got the regulatory thing wrong - to put it mildly. The closure means that no matter what the "updates", unless funds are returned to lenders directly, we're stuck.
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iRobot
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Post by iRobot on Apr 5, 2022 11:03:33 GMT
When ABL first announced the ASMX, given their stated intention in opening up to other platforms (and, for some reason, I seem to recall non-P2P offerings were to be included) I saw it as an intention to move away from any loan origination and to act as the broker.
Between the 'pausing' of the ASMX and the somewhat parlous state of the existing Loan Book, I can't help but wonder if the next 'significant' comms from ABL will be to announce an 'orderly wind down'. (Which, history tells us, can go one of two ways.)
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Post by ablrate on Apr 5, 2022 11:23:46 GMT
Hi
I don't intend to comment further for obvious reasons, but couple of things: ASMX is not closed, ASMX is alive and well and continuing its current mission. It is the Loan Exchange that is temporarily closed for the reasons stated and we will keep lenders up to date as we can. The FCA are the FCA and will do what they do, we are confident in our position and believe that the operation of the platform both practically and legally is in compliance. While we may disagree with the FCA, and we will be arguing our point, we have obligations to cooperate with the FCA and we are doing that as we always have.
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grumpsimus
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Post by grumpsimus on Apr 5, 2022 11:25:10 GMT
I think the suspension of ASMX is just an indication of the FCA's wish to kill P2P.
A little history - FCA never wanted to regulate P2P and were forced into it by George Osborne when he was Chancellor in 2016. At first it was interim regulation for existing P2P lenders, but gradually the rules have been tightened up, forcing more and P2P lenders to close. Certainly there were quite a number who deserved to be closed down. However, others have found the burden of regulation increasingly tiresome and costly and have given up.
Looking at from the FCA's veiwpoint P2P is just a troublesome can of worms, an extremely small part of their remit, where they get blamed when investors lose money. Why would they wish to regulate it? The comparison with mini-bonds is interesting, because this is another small area that has caused them a lot of problems.
The heart of the problem is that far too many lenders do not understand what they are doing with their money, nor the risks involved. They fail to appreciate that lending at very high interest rates in double digits, 12/13/14/15% is very high risk, with a very really propect of serious losses. They see the word SECURITY and imagine this will protect their money, but security is only good if it can be realised quickly and cheaply. They see the lender is regulated by the FCA again thinking this will protect from losses. The FCA specifically says it doesn't protect against investment losses. They have little real idea about what FCA regulation is about, often it is little more than the Lender isn't being run from inside Wormwood Srubs and that they should follow the FCA's copious rule book.
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Mousey
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Post by Mousey on Apr 5, 2022 11:52:46 GMT
I think the suspension of ASMX is just an indication of the FCA's wish to kill P2P.
A little history - FCA never wanted to regulate P2P and were forced into it by George Osborne when he was Chancellor in 2016. At first it was interim regulation for existing P2P lenders, but gradually the rules have been tightened up, forcing more and P2P lenders to close. Certainly there were quite a number who deserved to be closed down. However, others have found the burden of regulation increasingly tiresome and costly and have given up.
Hmmm I have it the other way round - the FCA wanting to implement restrictions but afraid of the treasury shutting down their warnings "one can expect substantial pushback..." . Eg in 2017, from an internal e-mail: "Jason is starting work on a Discussion paper for publication in weeks, which would lead into a Consultation Paper later in the year. The idea would for all that to conclude by February 2017 in time for the next ISA season. These are tight deadlines given that many of our concerns are still in formative stages and one can expect substantial pushback."
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ilmoro
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Post by ilmoro on Apr 5, 2022 13:02:51 GMT
I think the suspension of ASMX is just an indication of the FCA's wish to kill P2P.
A little history - FCA never wanted to regulate P2P and were forced into it by George Osborne when he was Chancellor in 2016. At first it was interim regulation for existing P2P lenders, but gradually the rules have been tightened up, forcing more and P2P lenders to close. Certainly there were quite a number who deserved to be closed down. However, others have found the burden of regulation increasingly tiresome and costly and have given up.
Looking at from the FCA's veiwpoint P2P is just a troublesome can of worms, an extremely small part of their remit, where they get blamed when investors lose money. Why would they wish to regulate it? The comparison with mini-bonds is interesting, because this is another small area that has caused them a lot of problems.
The heart of the problem is that far too many lenders do not understand what they are doing with their money, nor the risks involved. They fail to appreciate that lending at very high interest rates in double digits, 12/13/14/15% is very high risk, with a very really propect of serious losses. They see the word SECURITY and imagine this will protect their money, but security is only good if it can be realised quickly and cheaply. They see the lender is regulated by the FCA again thinking this will protect from losses. The FCA specifically says it doesn't protect against investment losses. They have little real idea about what FCA regulation is about, often it is little more than the Lender isn't being run from inside Wormwood Srubs and that they should follow the FCA's copious rule book.
FCA took over regulation in 2014. It was interim because it needed undertake authorisation process for those migrating from the previous OFT regime to the fully regulated activity. It was part of a much wider expansion of the FCA remit and of course they didnt want it as it was more work without a suitable increase in resources ie lots of little companies which didnt generate fees in proportion to numbers. You are right that many lenders dont understand it, but the FCA has done very little to ensure that platforms are required to properly inform lenders and educate them. A risk warning and a token few questions is insufficient, particularly in the case of development loans, which is where most of the issues tend to arise when it comes to understanding of information (valuations being the most obvious) and risk. FCA regulation is not as simplistic as you have suggested, but regulation is not really the problem, its monitoring & enforcement that takes the time & resources which the FCA just doesnt have. A careful look at many platforms appears to raise issues of compliance but the FCA is slow in addressing them. It is therefore much easier for the FCA just to ban or restrict anything complicated and make the market too restrictive or complicated for most to enter or continue.
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deltron
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Post by deltron on Apr 5, 2022 16:59:17 GMT
Hi I don't intend to comment further for obvious reasons, but couple of things: ASMX is not closed, ASMX is alive and well and continuing its current mission. It is the Loan Exchange that is temporarily closed for the reasons stated and we will keep lenders up to date as we can. The FCA are the FCA and will do what they do, we are confident in our position and believe that the operation of the platform both practically and legally is in compliance. While we may disagree with the FCA, and we will be arguing our point, we have obligations to cooperate with the FCA and we are doing that as we always have. Would be nice if you had spelt out exactly what this means for lenders' invested funds. You know, how this bombshell email practically affects lenders? There must be a law saying you're obliged to do that. I assume it means that a lender's position on Friday will, until further notice, be their fixed position for the entirety of a loan term. Could you confirm that, please?
Also, could you clarify the difference between the Loan Exchange and the ASMX because I have no idea, but have a sense that the distinction is quite important?
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Post by casper on Apr 5, 2022 17:37:06 GMT
ASMX is the Blockchain technology behind the market exchange. Ablrate spent a lot of money on implementing this a couple of years ago, with the misguided view that other p2p brokers would join up and allow loans to be exchanged between platforms. Mostly it seems they were sold on the whole Blockchain fad (because crypto) and wasted a lot of resource on this which could have been better used elsewhere (chasing up late loans etc). As far as we're concerned, ASMX and market exchange are synonymous, where ASMX was just the costly replacement to a secondary market which worked just fine, but I guess they needed something to justify keeping their development team busy and on the payroll. Now the exchange has been banned, it shows what a total waste of time and money the switch to ASMX really was.
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TitoPuente
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Post by TitoPuente on Apr 6, 2022 8:25:33 GMT
It's not clear to me why other P2P platforms can keep their secondary markets functioning? The email from DBW seem to indicate that the FCA is acting in general, against P2P markets, and not specifically against ASMX/ABL. However, I have not seen other platforms having to temporary suspend their SMs.
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GreenZero
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Post by GreenZero on Apr 6, 2022 8:39:57 GMT
It's not cleat to me why other P2P platforms can keep their secondary markets functioning? The email from DBW seem to indicate that the FCA is acting in general, against P2P markets, and not specifically against ASMX/ABL. However, I have not seen other platforms having to temporary suspend their SMs. That's how I read it. I wondered if they have until Friday too?
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Greenwood2
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Post by Greenwood2 on Apr 6, 2022 9:16:20 GMT
It's not cleat to me why other P2P platforms can keep their secondary markets functioning? The email from DBW seem to indicate that the FCA is acting in general, against P2P markets, and not specifically against ASMX/ABL. However, I have not seen other platforms having to temporary suspend their SMs. That's how I read it. I wondered if they have until Friday too? I used to find the ABL SM fairly incomprehensible, one reason why I stopped lending there, I don't know how it operates now. It may be the buying and selling at premium/discount that the FCA don't like? Or the potential cross platforms buying and selling?
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eeyore
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Post by eeyore on Apr 6, 2022 9:48:21 GMT
From yesterday's ABL email, I've tried to understand what the specific disagreement actually is between the FCA and ABL over the interpretation of FCA's rules. I have to say that I've found the email opaque with little that indicates the true nature of the disagreement. There is much text about some issues in the past which might imply that they are the roots of the current problem but, to cynics like myself, could be just distractions.
My reading of the email text throws up some hope for other P2P platforms:
"The FCA's stated current missions is to reduce access to high risk investments (of which P2P lending is now classified) and, as such, the FCA are interpreting rules around secondary markets in a way that makes secondary market trading difficult, if not almost impossible in an efficient manner."
Trading in an efficient manner? Could this be just the way that ASMX operates and other platforms don't suffer the 'inefficiencies' to the same extent?
"Our secondary market .... was created out of discussions with the FCA in 2016. The FCA wanted a solution that solved the issue of unregulated loans ... being traded with retail lenders. This was to avoid the issue where a retail lender could not place an unregulated loan into a SIPP or a IFISA. This was solved by our agreement system which ....."
There's an implication there that (one of) the issues is specifically related to SIPP & ISA accounts. Could blocking the secondary market for SIPP & ISA accounts allow the Loan Exchange to be reopened for the standard accounts?
"There are other solutions that we are reviewing which would allow the trading of loans."
That does give me hope that the silence from other P2P platforms may be because their secondary markets don't fall foul of whatever rule(s) FCA & ABL disagree about.
Finally, there an incomplete sentence at the end of the 7th paragraph:
"... but it would have been unwise of the business to continue with that argument when the FCA were ."
Anyone care to speculate on what the FCA were upto?
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registerme
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Post by registerme on Apr 6, 2022 9:57:58 GMT
Finally, there an incomplete sentence at the end of the 7th paragraph: " ... but it would have been unwise of the business to continue with that argument when the FCA were ." Anyone care to speculate on what the FCA were upto? I just read / interpreted that as "the FCA were going to continue the argument (implying they weren't going to change their stance), and that there was no point persisting with it". But I agree, it was clumsily written. EDIT: I should add that I could easily be wrong about this interpretation!
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