james
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Post by james on May 13, 2016 22:49:21 GMT
What should be done at RateSetter if an individual wishes to use lending via RateSetter to enable them in the future to truthfully state that "I am a self-certified sophisticated investor because at least one of the following applies: ... I have made more than one investment in an unlisted company in the two years prior to the date below"? Broadly this question resolves as how to ensure that at least two loans to businesses are made.
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Post by westonkevRS on May 14, 2016 8:27:24 GMT
What should be done at RateSetter if an individual wishes to use lending via RateSetter to enable them in the future to truthfully state that " I am a self-certified sophisticated investor because at least one of the following applies: ... I have made more than one investment in an unlisted company in the two years prior to the date below"? Broadly this question resolves as how to ensure that at least two loans to businesses are made. Common sense answer (i.e. not official RateSetter) is that you are not making investments. You are lending, and although we informally call our lenders investors, they are not. In my opinion. But it's an interesting question, I've asked our regulatory experts. Hopefully post an answer here. Kevin.
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Post by earthbound on May 14, 2016 9:24:50 GMT
Hi Kev.. While your diggin .. What is the bottom line within p2p to be considered as a HNWI ? Erm ... I am not that's why I do not know.. Just out of interest..
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james
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Post by james on May 14, 2016 20:37:13 GMT
Common sense answer (i.e. not official RateSetter) is that you are not making investments. You are lending, and although we informally call our lenders investors, they are not. In my opinion. But it's an interesting question, I've asked our regulatory experts. Hopefully post an answer here. Thanks, I did think it was quite interesting in part because I suspect that a couple of £5 loans isn't quite what Parliament and the regulator had in mind. At least one of the SIPP providers that allows investment in RateSetter from their SIPP - SIPPclub - is explicit in accepting lending based investments as a qualifying factor, though I'm not certain that they are actually seeking to satisfy the sophisticated investor regulatory requirement. But I think they also have a "non-trivial" rider to that, for obvious reasons, and their £200k minimum in pension holdings is also non-trivial, being way above the average UK pension pot size. I don't actually think that the answer to this question is one that should be uniform across all P2P lending activities. There's a pretty significant difference between RateSettter or Zopa where there is no material loan-specific lender decision-making* and many other platforms where the lender does need to make an explicit choice to invest or not in a specific offer. For example, there are these loans that I'm involved in personally: 1. A loan of £30,000 to a single firm as part of a beta offering from an existing platform, which has not matured into a non-beta product and may never do so. 2. A loan of £75,000 to a single firm with less than a year of history via an SPV that provides management services for the borrower as part of the package. On a second platform. Each of those clearly has significant and concentrated risk exposure compared to the RateSetter offering as well as the lender making a specific judgement about the borrower. For me as an individual unless the FCA proceeds with a plan to change pension rules I'll be certifiable as a HNW investor in a couple of years. Maybe even if they do change the rules, though that'll probably take longer, while I mentally curse the FCA for changing the rules after I've already made the investment decision to use the pension product knowing that the money would be available and count at the time of the investment decision. Got to "love" regulatory and legislative risk... *Both RateSetter and Zopa are today effectively managed funds using a regulatory loophole and actively work to make it impossible for an investor to choose to buy or even sell an individual loan investment, just like a managed fund, much as spread betting uses gambling law as a CGT loophole. A world away from the make your own decisions part of P2P.
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james
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Post by james on May 14, 2016 20:59:12 GMT
Hi Kev.. While your diggin .. What is the bottom line within p2p to be considered as a HNWI ? Erm ... I am not that's why I do not know.. Just out of interest.. The FCA paraphrases the legal requirements here. Broadly it's income of at least £100k a year or net investable assets of at least £250k. Investable assets excludes a home and defined benefit pension and is counted after subtracting all unsecured borrowing, but not secured like a mortgage. The precise status of money purchase pension pots may be uncertain because they are not available only at termination of service, death or retirement. Indeed, I've no intention at all of taking money from my own pension pots at any of those specific times, it's been pre-planned for years to happen soon after I reach 55, regardless of whether I'm retired or working at the time. The FCA recently consulted on a regulatory change that would bar money taken from a defined contribution pension pot from counting towards the HNW requirement, details not specified. For someone like me that would mean reducing pension contributions so that I would reach the HNW threshold sooner instead of having it delayed by the money going into the pension.
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bigfoot12
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Post by bigfoot12 on May 15, 2016 9:12:59 GMT
Sorry but that's a very murky distinction. Functionally, lending is as much as a form of investment as any other fixed income asset. Interesting, but if you lent money to a company would you say that you had made an investment in that company? (Doesn't matter to me as I have two equity investments bought on Seedrs.)
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registerme
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Post by registerme on May 15, 2016 12:38:01 GMT
Take a look at the recent European AltFi conference where one speaker tries to argue that the P2P ITs are generating "alpha" ... vs. cash! Really impressive to outperform a risk-free asset, yielding all time lows, and no mention of correlation at all. And how much was a ticket to that conference, so you could benefit from that amazing insight and wisdom?
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Post by westonkevRS on May 16, 2016 17:44:57 GMT
BLUF: No, lending through RateSetter will not qualify you as a sophisticated investor.
There are no restrictions on investing through RateSetter (despite it actually being classified as an investment) as there is in investments through equity based crowd platforms (i.e. HNW/Sophisticated/Restricted % of assets invested).
The FCA regulations recognise the very different risk profiles of debt vs equity. However to note that the FCA does have specific rules to protect investors in debt peer to peer (including marketing and risk information) in addition to protection of borrowers. A large part of the FCA authorisation process has been focused on this.
But does being a lender with RateSetter make you sophisticated, so that you can be classified as sophisticated for equity investment. Does the act of lending to businesses through RateSetter inadvertently qualify you as sophisticated. The answer was no, because the lender makes no active decision to lend to businesses, as opposed to retail. And the FCA sees lending (i.e. debt, despite the "investment" classification) very differently to investing (equity). This has been made very clear in the FCA authorisation process.
So unfortunately RateSetter does not provide an easy back door to this qualification, based on FCA feedback during the RateSetter authorisation process.
Kevin.
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Post by yorkshireman on May 16, 2016 18:10:18 GMT
Personally I find the expression “sophisticated investor” meaningless, it’s just more financial sector bullsh*t.
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Post by earthbound on May 16, 2016 18:20:26 GMT
Personally I find the expression “sophisticated investor” meaningless, it’s just more financial sector bullsh*t. Yea agree.. What about 'unsophisticated investor ' 'please click this button if you are an unsophisticated investor where you will be directed to the deposit funds page, please trust us and just answer Yes to all questions'
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pip
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Post by pip on May 16, 2016 19:46:47 GMT
Personally I find the expression “sophisticated investor” meaningless, it’s just more financial sector bullsh*t. Yea agree.. What about 'unsophisticated investor ' 'please click this button if you are an unsophisticated investor where you will be directed to the deposit funds page, please trust us and just answer Yes to all questions' Agree with that, surely having lots of money does not qualify you as sophisticated either? It seems random when they ask too, I was asked it when I opened a vct, but people aren't for normal share dealing. I would say anybody that invests in a banks or oil companies shares and can convincingly argue that they understand the results at all are far more sophisticated than me. Should investors of peer to peer be sophisticated, erm no idea. I guess it's how it's marketed, investors should be clear that p2p is nothing like a savings account and they can lose money. Are some p2p current adverts a bit like savings account adverts, imho a little bit. However people need to look after themselves in this life, so.....
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Post by newlender on May 16, 2016 20:14:14 GMT
From the Seedrs FAQ page...
'Are Seedrs investments safe?'
'No........in most cases money will not be returned to investors.'
That's a pretty stark warning, but clearly truthful. P2P lending is a different platform of course but I do agree that the FAQs are often over-positive and could possibly go back towards the Seedrs example. Now that we have non-safeguarded options such as Zopa Plus this is particularly pertinent. I was trying to remember how I got through the Seedrs vetting process as I am neither high-worth nor sophisticated. What I would say is that Seedrs adds a bit of 'edge' to crowdfunding that ordinary P2P doesn't have. This makes it more of a gamble, but also more interesting. The two platforms complement each other and give me hours of entertainment by visiting the sites and forums. Nowhere in any of the FAQs I've seen, except for Seedrs, is a certain recommended % mentioned as a % of total assets to be invested - a shame, I think.
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james
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Post by james on May 16, 2016 21:01:08 GMT
The FCA regulations recognise the very different risk profiles of debt vs equity. ... But does being a lender with RateSetter make you sophisticated, so that you can be classified as sophisticated for equity investment. Does the act of lending to businesses through RateSetter inadvertently qualify you as sophisticated. The answer was no, because the lender makes no active decision to lend to businesses, as opposed to retail. And the FCA sees lending (i.e. debt, despite the " investment" classification) very differently to investing (equity). This has been made very clear in the FCA authorisation process. So unfortunately RateSetter does not provide an easy back door to this qualification, based on FCA feedback during the RateSetter authorisation process. Thanks for the answer and reasoning. Given how RateSetter operates that seems appropriate for RateSetter, which actively prevents any decision-making by investors about who their money is lent to once they have decided to use a platform with mixed business and retail lending. Interesting to read the active decision to lend to business reasoning, which to some extent appears to suggest that active decisions in other places may qualify, particularly say where lending to startups is done.
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james
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Post by james on May 16, 2016 21:11:55 GMT
surely having lots of money does not qualify you as sophisticated either? The sophisticated investor qualifying rules are about ability to analyse a business and make an investment decision. The high net worth rules are about having sufficient income or assets to be able to afford to lose some money. Since RateSetter denies investors any ability to make any loan-specific decisions once they have decided to use the platform it doesn't seem unreasonable to have investing through RateSetter not be qualifying, since it can't provide experience in that area. Zopa does provide an ability to choose to do lending to businesses but still denies any ability to choose which businesses. So my view is that Zopa would also not be an appropriate route to qualifying, because the decision-making objective can't be met there. It wouldn't be a good idea generally to block lending-based investing from qualifying, though, since one aspect of sophistication is choosing how to invest and recognising differences in risk profile is one of the aspects of that. Choosing lending-based rather than equity-based investing would actually be a potential indication of sophistication.
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Post by earthbound on May 17, 2016 5:32:58 GMT
From the Seedrs FAQ page...
'Are Seedrs investments safe?'
'No........in most cases money will not be returned to investors.'
Haha ... thats what I call honesty.. and I bet its full of 'sophisticated investors' or potty philanthropists..
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