littleoldlady
Member of DD Central
Running down all platforms due to age
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Post by littleoldlady on May 18, 2016 11:08:27 GMT
If a platform had full authorisation from the FCA (few have yet) and was allowed to handle ISAs then I would hope that there would be compensation if the platform was fraudulent. This is different from commercial failure, which I would not expect to be covered.
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Post by tybalt on May 18, 2016 11:16:35 GMT
I do not think there is any compensation scheme for failure of FCA registered providers.
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shimself
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Post by shimself on May 18, 2016 12:42:53 GMT
I do not think there is any compensation scheme for failure of FCA registered providers. I have forgotten the detail, but about a month ago there was something about a possibility of compensation under some particular circumstance.
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Post by dualinvestor on May 18, 2016 15:53:28 GMT
I do not think there is any compensation scheme for failure of FCA registered providers. This thread provides some indication that compensation might be available if you were "mis-sold" P2P p2pindependentforum.com/thread/5120/limited-fscs-protection-p2pOther than that there is no direct compensation for losing funds invested from the FSCS or any other Government scheme as far as I am aware. Some platforms have "provision funds" but if we are narrowing this to the title of the thread, if the platform itself is a Ponzi scheme then it would be unwise to believe that anything said on it is true. Similarly people have stated on other threads that part of regulatory approval is the requirement for a run off scheme, if this is the case remember, as far as I am aware, all platforms including the large ones are only operating under "Interim Permissions" and do not have full authorisation yet. Even if they were fully authorised it is doubtful that some of the potential schemes suggested here, ficticous borrowers, lending to related parties etc would be picked up before substantial losses were incurred by P2P lenders. Remember Mr Madoff and his various funds were authorised, albeit by a different regime to the FCA, and he managed to operate a Ponzi scheme for many years involving billions of dollars.
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am
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Post by am on May 18, 2016 18:23:48 GMT
Exactly, in Ponzi schemes there may not be any real borrowers. Most p2p platforms do not list borrower details (full name, address, contact information); for all we know information provided could be totally fictitious in order to lure investors in. The way i see it p2p lending has huge potential for abuse and the only thing that could stop them from turning to Ponzi is strict regulation. But, can we really rely on FCA for that? Now, even in the case of a legitimate p2p business, there is substantial risk. Sure, p2p means that the lender has a legal claim over payments from the borrower even in case of platform folding. But who is going to enforce borrowers to continue to pay their loans once they learn the platform has defaulted? Even if they wanted to, they couldn't since they do not have the lenders contact information. FCA regulation dictates that there should be a plan for a third-party to take over in case of default; however, no one expects it to go that smoothly. And of course the platform has just folded, why? Perhaps because there was a problem with their paperwork, maybe our contracts aren't binding? Perhaps because their systems crashed or were hacked, we can't see who owes us what. Or one of many other problems which would bode ill for the lenders. The obvious reason for a platform to fold is for them to run out of working capital. Most platforms are in startup mode, and are running on equity capital or borrowings rather than on trading profits. If this runs out and they can't raise more then there's little alternative to folding.
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zoll
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Post by zoll on May 18, 2016 20:17:26 GMT
[quote author=" dualinvestor" Even if they were fully authorised it is doubtful that some of the potential schemes suggested here, ficticous borrowers, lending to related parties etc would be picked up before substantial losses were incurred by P2P lenders. Remember Mr Madoff and his various funds were authorised, albeit by a different regime to the FCA, and he managed to operate a Ponzi scheme for many years involving billions of dollars. [/quote] As long as there are more investors joining the platform and throwing money at it, than investors pulling money out, a Ponzi scheme could theoretically go on forever. This is how Madoff got away with it for so long, and this is exactly the growth stage the industry and most of the platforms are at. The temptation to pay any incidental requests for withdrawal of "old" money with a little bit of the "new" money pouring in, in ever increasing amounts, is very great and hard or impossible for investors to uncover. |
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