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Post by westonkevRS on Jan 27, 2016 21:23:57 GMT
Go on then Kev... Whilst on this topic, is there an eta you have in RS for getting that authorisation (assuming you pass of course)? We wish, you can't push or rush these things. Just going through the process. Submitted our ISA submission like everyone else last year (lovely book type document, I'm going to keep one as a memento!), we have a case manager and we are answering questions as they come in. We run to their timetable. Obviously we are confident, but as we are quite large and " one of the large three", there is the need to cover a lot of things and make sure the decision is right. It is perhaps much easier for the smaller less complicated platforms, and where the risk is less (to the FCA, not necessarily to the lenders!). Kevin.
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teddy
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Post by teddy on Jan 27, 2016 23:48:00 GMT
As a non taxpayer, the only thing about a P2P ISA that interests me is the FSCS protection that a normal bank would have. What's the position on this?
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jonah
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Post by jonah on Jan 28, 2016 5:58:58 GMT
As a non taxpayer, the only thing about a P2P ISA that interests me is the FSCS protection that a normal bank would have. What's the position on this? I don't believe that the wrapper would make any difference to Fscs.
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Post by westonkevRS on Jan 28, 2016 7:29:26 GMT
As a non taxpayer, the only thing about a P2P ISA that interests me is the FSCS protection that a normal bank would have. What's the position on this? RateSetter remains strongly in the camp that we don't want to provide FSCS protection (although some newer employees have differing views). Quite simply FSCS would push up costs me lower lender returns, and potentially give an incentive for us to act less responsibly. Especially smaller players desperate for growth. RateSetter's mantra has always been to offer a better deal for lenders and borrowers. Kevin.
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pikestaff
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Post by pikestaff on Jan 28, 2016 8:16:18 GMT
As a non taxpayer, the only thing about a P2P ISA that interests me is the FSCS protection that a normal bank would have. What's the position on this? No protection. And long may it remain so. P2P investments are not deposits (even on RS ). They are loans with risk attached. You make your investment decision based on the rate and the risk. There is no FSCS protection on a stocks and shares shares ISA. Why should there be on a P2P ISA? Just another investment class.
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teddy
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Post by teddy on Jan 28, 2016 10:39:48 GMT
As a non taxpayer, the only thing about a P2P ISA that interests me is the FSCS protection that a normal bank would have. What's the position on this? No protection. And long may it remain so. P2P investments are not deposits (even on RS ). They are loans with risk attached. You make your investment decision based on the rate and the risk. There is no FSCS protection on a stocks and shares shares ISA. Why should there be on a P2P ISA? Just another investment class. My understanding is that if you have a stocks and shares ISA, and your provider goes bust, then you're covered. Obviously you're not covered if the stock market tanks.
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pikestaff
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Post by pikestaff on Jan 28, 2016 12:42:14 GMT
No protection. And long may it remain so. P2P investments are not deposits (even on RS ). They are loans with risk attached. You make your investment decision based on the rate and the risk. There is no FSCS protection on a stocks and shares shares ISA. Why should there be on a P2P ISA? Just another investment class. My understanding is that if you have a stocks and shares ISA, and your provider goes bust, then you're covered. Obviously you're not covered if the stock market tanks. Ah. That one's more complicated. james will understand it much better than me. However, I think the primary protection there is that investments and cash should be held in bankruptcy-remote nominee and client fund accounts, so the investor should not suffer loss. That applies to P2P as well. If there are losses through fraud or negligence of a S&S ISA provider (including if client funds have not properly been kept separate) I think there is cover up to £50k. I don't know if this also extends to authorised P2P platforms but I suspect that it probably does.
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james
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Post by james on Jan 28, 2016 20:56:41 GMT
There is no FSCS protection on a stocks and shares shares ISA. There is considerable FSCS protection for a stocks and shares ISA, potentially up to a million Pounds or so depending on the specifics of how the money is invested, but also lots of gotchas and limits on what is and isn't protected. Here's a summary of how it works: 1. There is no protection at all for normal investment losses. Buy a share or fund and if the investments it holds fall to zero value you've lost your money aside from the possibility of normal bankruptcy or whatever recovery. 2. Cash is client money and the S&S ISA is quite likely to place it on deposit in a trustee account. The deposit will get the usual FSCS protection for deposits, £75,000 per firm for all of your deposits combined. If the S&S ISA splits the money over several deposit takers that will increase the amount that is protected. It has to be a client account but it doesn't have to be a deposit. 3. In addition there are the client account rules that money in client accounts is held in trust and there must be both daily reconciliations and no taking out to use the money for the firm's own purposes during the day. the trust relationship should protect an unlimited amount unless the money is placed with a deposit taker that goes bust, in which case see 2 and the £75,000 per deposit taker protection. 4. There is investment protection of £50,000 for losses due to something like the S&S ISA provider going bust or fraud there. Not investment losses, but fraud and such. 5. There is investment protection of £50,000 for losses due to fraud and such at each investment house where you hold a normal fund. Hold funds from ten different fund houses and you have a total of £500,000 of cover but only £50,000 at each. Again, not investment losses, but fraud. For caveats on this and more extensive potential protection in the case of some types of issue see the lamentable tale of the CF Arch Cru funds where every regulator (FSA and Channel Islands Stock Exchange) and custodian ( Capita & HSBC, AKA the CF in the name) got things wrong, as did will the financial products firm Arch FP (sued by new boards of the Guernsey investment cells) and most firms ended up paying investors something, as did many IFAs who recommended it based on misleading descriptions of risk level and/or excessive concentration in one investment. 6. There is no FSCS protection for shares, including investment trusts and exchange traded funds or exchange traded commodities. Trustee accounts should provide some level of protection but in the case of fraud or theft they might not actually be used. For an example of the sort of thing that can happen consider the pension case where the NEST scheme that is likely to be used by many firms paid £1.4 million to fraudsters who submitted a change of bank account details for payments to a supplier. Investors will bear the cost of this beyond the quarter that had been recovered by mid 2014 and any later recoveries. No FSCS payout because NEST isn't insolvent. That insolvency issue matters because that's when the FSCS steps in, after a firm is unable to meet its obligations and not until then. So quite a bit of protection but assorted caveats over when and what is covered and how long it can take to get paid. It's a very different world from normal deposits in current or savings accounts where the FSCS expects to pay within a week unless the business is just transferred to a different holding company with no loss. It's done this routinely without issues in many cases over the last five years.
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james
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Post by james on Jan 28, 2016 21:01:59 GMT
There is no FSCS protection on a stocks and shares shares ISA. Why should there be on a P2P ISA? Just another investment class. The critical protection that is delivered in a S&S ISA is protection against fraud and related issues at a S&S ISA or fund house, rather than for the investments themselves. In the P2P world comparable protection would be against bankruptcy or fraud at the P2P provider but not for losses on the underlying loans. Since P2P provider fraud and failure is one of the main hard to protect against issues the value of FSCS protection for that would be quite significant, particularly in encouraging investors to use and trust newer entrants to the market. Naturally the well established players would not find this of such benefit since it could increase their competition and costs, while they would receive comparatively lower trust increase benefit. However in the larger scheme of things, while they are relatively trusted vs other P2P providers, they are not relatively trusted when compared to more conventional existing investment options and I think that there is significant benefit to be had for them as well. While the costs would need to be considered carefully, I do think that protection against P2P provider failure would have significant value to investors and in supporting new lending entrants to the market. That support of new entrants is one of the government's explicit objectives in encouraging P2P. How FSCS cost should vary among providers based on their situation would be a very interesting issue to evaluate. For those who don't know, the FSCS is funded by a levy on particular providers that is part fixed to cover costs and in part to cover past bailouts of firms of the same class of business (up to a limit) then to other classes of business if the amount is to large. The past bailout portion would normally be to do something like paying back a loan from the BoE over many years if the loss was large. Other than provision of loans there is no government funding, it's all paid for by the businesses in the particular sector. Because of the funding mechanism it is quite possibly advantageous to bigger firms to take over or split take overs of failing firms, as often happens in the banking area. The ongoing business with working debt collection and a new customer base to sell to might be cheaper than the FSCS payout would be, particularly if spread over several bigger firms. More challenging would be widespread fraud at a bigger firm. For example, there have been cases outside where those responsible for lending ignored the firm's rules to meet lending targets and get bonuses, resulting in the firm having a higher than intended risk profile. One prominent one involved a sub-prime lender. There has also been fraud conducted by the person with oversight of fraud prevention at a bank, notably HSBC UK. And fraud involving misrepresentation of the value of security for loans in many cases, leading to lending exceeding asset value and a loss when the borrower skipped with the money.
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james
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Post by james on Jan 28, 2016 21:54:07 GMT
There appears to be a substantial error in that blog entry by Luke: " You’ll only be able to open an Innovative Finance ISA with one provider each year
You can only open one ISA in each category per year ... you can only open an IF ISA with one provider in the first year (and naturally we hope you’ll choose RateSetter), but you can open one with a different provider in year two." It is normal for investors to be able to open an unlimited number of ISAs in each category each year and I've seen nothing to indicate that IFISAs will be any different. The critical distinction is new money subscribed during the tax year, which can only be with one provider ("ISA manager") of each type at a time. Such money can normally be transferred in whole between providers, so if normal rules apply it would be possible to have say five different IFISAs open in one year with current year subscription money, but only by transferring all money paid in during that year to the new place each time, so five consecutively not two or more concurrently. Meanwhile money paid in to any adult* ISA in past years can be freely transferred to an unlimited number of other providers, regardless of where the current year money goes. When I read that misleading information in conjunction with the headline "IF ISA: allowance transfers allowed" it overall gives me the impression that the blog post amounts to a misleading financial promotion that would encourage investors to falsely believe that if they wanted to put any new money into an IF ISA with RateSetter, they could not also transfer past year money to any other IFISA provider. I'm not party to the discussions with the Treasury and it's possible that the rules are being modified to be far more restrictive than for normal ISAs but I've seen no sign of this so far. Would you be kind enough to relay this concern to Luke or an appropriate person as a complaint about an apparently misleading financial promotion in preference to me making a report to the FCA's misleading financial promotion team, which is what I would do if there was no relationship channel to use? I'd much, much prefer Luke giving a correct description than do that, since there's plenty of misunderstanding of the rules out there and it's not that hard for providers to get it right and it'd be very welcome correcting education to those who read misleading descriptions elsewhere, something I'd love to see a leader like RateSetter getting right! I'd very much welcome direct (private if necessary) feedback on this because I do think that this on the whole merits a complaint to the FCA team if it's not resolved, because it would tend to encourage those who want some money at RateSetter to think that all current and past year ISISA money also had to be with RateSetter (the only open one a year part). While it's largely moot, I expect, and not something I'd complain about, RateSetter could also let someone open two or more IFISA accounts in the same tax year and each could hold new subscription money because the ISA manager for both would be RateSetter and the limit is per ISA manager not per account. Well, unless the Treasury has a specific IFISA restriction like the one for H2BISAs. Less seriously and not something I'd mention to the FCA because RateSetter doesn't offer one and would receive no benefit, Luke is also wrong in this claim: " One quirk of the Help-to-Buy (H2B) ISA is that you can’t pay into one during the same year that you pay into a cash ISA." You can have a H2B and an unlimited number of cash ISAs with current year subscription money provided you pick your ISA manager with care. The key possible error that Luke made here appears to be not realising that the "one of each type" rule applies to ISA managers, not ISA accounts, and also perhaps not realising that a H2B ISA is a form of cash ISA. What this means is that if a particular cash ISA manager offers both H2B and normal cash ISAs you can have one H2B ISA account and an unlimited number of standard cash ISA accounts with that ISA manager, for example one or more each for variable, fixed rate and term deposit accounts. Not really a surprise that he'd get this wrong, MSE did initially until I corrected them but now point 7 of their H2B ISA page is correct and they verified with the Treasury. It's also worth opening their "What should do if I've already opened a cash ISA" bit within point 7. While it's moot here, for completeness a person can only have H2B ISA accounts with one ISA manager at a time, including for past year money. All H2B has to be at the same provider, including all past year money, very much like the restriction on the junior ISAs. I assume that Luke or whoever wrote the copy just didn't know the rules that well or felt it was too complicated to explain them correctly, something I hope the fairly short correcting descriptions in this post has illustrated can be done. Unless, of course, the Treasury is introducing far more restrictive rules for IFISAs than apply to other types, in which case I'll happily apologise to Luke or whoever. Others: don't worry, I'm going to give RateSetter ample time to check and correct, I know there's lots of confusion in this area. * I haven't tried to cover all cases involving Junior ISAs in this post, which is intended only to cover adult ISAs not things like what happens when a Junior ISA holder becomes an adult and what restrictions do or don't apply during that transition time.
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jonah
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Post by jonah on Jan 28, 2016 22:11:14 GMT
Note to self: don't argue with james about ISA rules.
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james
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Post by james on Jan 28, 2016 22:17:36 GMT
Note to self: don't argue with james about ISA rules. ROFL. I try to be understanding when people get them wrong. Just interested in people getting it right and in particular mistakes not giving an advantage to a player who makes the mistake, which is what tripped misleading financial promotion rather than just mistake for me in this case. And of course if I notice anyone else doing the same, or you do, there's no harm at all in trying to get them to also get it right. Overall the blog is of course excellent and very welcome news and I don't think anyone actually deliberately gave wrong information.
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pikestaff
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Post by pikestaff on Jan 29, 2016 0:16:04 GMT
Note to self: don't argue with james about ISA rules. Indeed. Likewise FSCS rules. Though slightly unfair of james to quote from my earlier post twice, rather than my second one which was half right, and specifically invited him to comment. In defence of my earlier post I thought the questioner was asking about deposit-type protection.
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james
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Post by james on Jan 29, 2016 2:24:55 GMT
Sorry re what to quote choice, I thought that your first post had the most leading question even though I knew that you'd clarified later - the leading question aspect made the smaller and more on-point quote. Please do remember that I appreciate in particular well referenced corrections that may serve to educate me in the error of my beliefs. Beats continuing to be wrong! Of course if opinion is involved I may well not agree, facts are far easier to agree on.
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Post by westonkevRS on Jan 29, 2016 10:13:18 GMT
Note to self: don't argue with james about ISA rules. Absolutely. james , I really appreciate the feedback. I've gone back to Luke to consult with our "expert" and hopefully provide a response and/or correction. Kevin.
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