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Post by boudicca on Aug 7, 2018 11:53:08 GMT
'The FCA has suggested that P2P lenders could be limited to sophisticated investors or high-net-worth individuals who are fully aware of the risk involved in P2P lending. The regulator has also proposed that all investors should be limited to investing a maximum of ten per cent of their net investible portfolio in P2P.'
I can't see how they would be able to enforce a limit, maybe they will simply suggest a sensible investment level, which would effectively make no difference.
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jlend
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Post by jlend on Aug 7, 2018 12:13:33 GMT
“We have the odd quibble on some detail here and there, but we agree with the overarching objectives,” said Lewis “We do, however, fundamentally disagree with one proposal around marketing restrictions.”
The FCA has suggested that P2P lenders could be limited to sophisticated investors or high-net-worth individuals who are fully aware of the risk involved in P2P lending. The regulator has also proposed that all investors should be limited to investing a maximum of ten per cent of their net investible portfolio in P2P.
“We do not agree with this proposal”
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Neither do I, as I'm not aware of any other investment where a regulator gets to limit the amount one can invest.
As far as i am aware this is a self declaration via a set of questions that would be asked. I have to retake a questionnaire every two years due to some corporate bonds i hold for example that include similar questions. Here is another example of some wording around a product. In this case for vcts. Just replace vct with p2p. Important information: VCTs should only be considered by sophisticated investors with significant investment portfolios who can take a long-term view and are comfortable with higher risks. The Financial Conduct Authority (FCA) suggests a sophisticated investor is somebody with an annual income in excess of £100,000 or investable assets of more than £250,000. Even then we feel VCTs should account for no more than 10% of a well-diversified portfolio.
VCTs are unlikely to be suitable for mainstream investors who may need access to their money in the short term, or for whom loss of the investment will cause financial hardship. This website does not constitute personal advice. We assume investors will make their own assessment of their expertise and the suitability of VCTs for their circumstances. Those with any doubts should seek expert advice.
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jlend
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Post by jlend on Aug 7, 2018 12:45:49 GMT
HIGH NET WORTH EXAMPLE.
I confirm that one or more of the following criteria applies to me.
1) I have a total annual income or £100,000 or more during the last 12 months;
2) I have net assets of £250,000 or more (not including my primary residence, or assets due under an insurance contract, or pension or termination benefits).
I make this statement so that I can receive promotional communications which are exempt from the restriction on promotion of non-readily realisable securities. The exemption relates to certified high net worth investors and I declare that I qualify as such because at least one of the following applies to me:
(a) I had, throughout the financial year immediately preceding the date below, an annual income to the value of £100,000 or more;
(b) I held, throughout the financial year immediately preceding the date below, net assets to the value of £250,000 or more.
Net assets for these purposes do not include:
(i) the property which is my primary residence or any loan secured on that property;
(ii) any rights of mine under a qualifying contract of insurance; or
(iii) any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are), or may be, entitled.
I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on investments.
By clicking confirm, I have read and agreed with these terms and conditions
EVERYDAY INVESTOR EXAMPLE
I agree to invest no more than 10% of my savings (including shares, bonds, ISAs and property, excluding my primary residence) into investments that cannot be easily sold.
I make this statement so that I can receive promotional communications relating to non-readily realisable securities as a restricted investor. I declare that I qualify as a restricted investor because:
(a) in the 12 months preceding the date below, I have not invested more than 10% of my net assets in non-readily realisable securities; and
(b) I undertake that in the 12 months following the date below, I will not invest more than 10% of my net assets in non-readily realisable securities.
Net assets for these purposes do not include:
(a) the property which is my primary residence or any money raised through a loan secured on that property;
(b) any rights of mine under a qualifying contract of insurance; or
(c) any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are), or may be entitled.
I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-readily realisable securities.
By clicking confirm, I have read and agreed with these terms and conditions
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aju
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Post by aju on Aug 7, 2018 13:42:11 GMT
Thanks for the examples jlend , extremely interesting, might not be viable for me but here's what I think. HIGH NET WORTH EXAMPLE. <Snipped as we don't qualify for HNW ex> EVERYDAY INVESTOR EXAMPLE I agree to invest no more than 10% of my savings (including shares, bonds, ISAs and property, excluding my primary residence) into investments that cannot be easily sold. I make this statement so that I can receive promotional communications relating to non-readily realisable securities as a restricted investor. I declare that I qualify as a restricted investor because: (a) in the 12 months preceding the date below, I have not invested more than 10% of my net assets in non-readily realisable securities; and (b) I undertake that in the 12 months following the date below, I will not invest more than 10% of my net assets in non-readily realisable securities. Net assets for these purposes do not include: (a) the property which is my primary residence or any money raised through a loan secured on that property; (b) any rights of mine under a qualifying contract of insurance; or (c) any benefits (in the form of pensions or otherwise) which are payable on the termination of my service or on my death or retirement and to which I am (or my dependants are), or may be entitled. I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from an authorised person who specialises in advising on non-readily realisable securities. By clicking confirm, I have read and agreed with these terms and conditions I'm not sure one would need this for Zopa, but if they do both myself and Mrs Aju fail the HNW option and as for the "Everyday Investor" we both fail that too as we have commited > 10% net worth of our savings to Zopa alone. If I add in that we have 13% in shares that we would sell as a last resort as the Divi's on thenm are quite hansome to say the least. Thing is I know what I am doing with Zopa and to be honest whilst I understand there is a risk we are both fully aware of what we are doing. Whilst we cannot get access to Zopa funds we are well covered elsewhere with easy access money 47% for the next 5/6 years or probably more if the investments keep paying in. Short of our only main asset, our house, being destroyed and not being covered by our insurance is virtually nil too. So I would not be able to sign that and tell the truth, that said what would the platform do anyway force me to sell off my investment, not at 1% mate they'd have to whistle for that option. I've made a lot of money on Zopa interest over the last 10 years or so, well relative to ordinary banking options that is. For me there is no better option for our money at the present juncture other than increasing our shares but to be honest I wouldn't want to commit more funds to those anyway. We have ISA's, locked in on s*h*i*t*e rates that also need to transfered in soon as well. My view of Zopa and ratesetter and FS would be they would lose a lot of funding from normal people, the banks would be the only beneficiaries in this option. Again if it affects these platforms that is. [Edit]
Found this comment from the FCA relayed in an article here
Probably won't affect us as we may considered "sophisticated" mind you that's not a term I've ever been saddled with in the past  |
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jlend
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Post by jlend on Aug 7, 2018 14:05:29 GMT
SOPHISTICATED EXAMPLE
I confirm that one or more of the following criteria applies to me:
1) I have been a director of a company with an annual turnover of £1 million or more in the last 12 months;
2) I have made more than one investment in an unlisted company in the last year
3) I have been a member of a group of business angels for at least 6 months
4) I have worked in the finance industry in an active professional capacity, financing small and medium firms in the last 24 months.
I declare that I am a self-certified sophisticated investor for the purposes of the non-readily realisable securities. I understand this means:
(a) I can receive promotional communications made by a person who is authorised by the Financial Conduct Authority which relate to investment activity in non-readily realisable securities;
(b) the investments to which the promotions will relate may expose me to a significant risk of losing all of the property invested I am a self-certified sophisticated investor because at least one of the following applies:
(i) I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below;
(ii) I have made more than one investment in an unlisted company in the two years prior to the date below;
(iii) I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises;
(iv) I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million.
I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on investments.
By clicking confirm, I have read and agreed with these terms and conditions
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aju
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Post by aju on Aug 7, 2018 14:14:31 GMT
SOPHISTICATED EXAMPLE I confirm that one or more of the following criteria applies to me: 1) I have been a director of a company with an annual turnover of £1 million or more in the last 12 months; 2) I have made more than one investment in an unlisted company in the last year 3) I have been a member of a group of business angels for at least 6 months 4) I have worked in the finance industry in an active professional capacity, financing small and medium firms in the last 24 months. I declare that I am a self-certified sophisticated investor for the purposes of the non-readily realisable securities. I understand this means: (a) I can receive promotional communications made by a person who is authorised by the Financial Conduct Authority which relate to investment activity in non-readily realisable securities; (b) the investments to which the promotions will relate may expose me to a significant risk of losing all of the property invested I am a self-certified sophisticated investor because at least one of the following applies: (i) I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below; (ii) I have made more than one investment in an unlisted company in the two years prior to the date below; (iii) I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises; (iv) I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million. I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on investments. By clicking confirm, I have read and agreed with these terms and conditions thats us bolloxed then  unless no 2 fits for Zopa, not sure if Zopa is listed or unlisted probably unlisted so I might pass muster. Although I notice that item "ii" might stumble me again.  I'm not selling though without a lot of kicking and screaming!
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bigfoot12
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Post by bigfoot12 on Aug 7, 2018 15:21:38 GMT
SOPHISTICATED EXAMPLE I confirm that one or more of the following criteria applies to me: ... 2) I have made more than one investment in an unlisted company in the last year ... (ii) I have made more than one investment in an unlisted company in the two years prior to the date below; I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on investments. By clicking confirm, I have read and agreed with these terms and conditions thats us bolloxed then unless no 2 fits for Zopa, not sure if Zopa is listed or unlisted probably unlisted so I might pass muster. Although I notice that item "ii" might stumble me again. I'm not selling though without a lot of kicking and screaming! Two £10 investments on Seedrs every two years will enable you to tick box ii. You will have to claim on Seedrs that you will limit your investments to no more than 10% of your wealth which won't be a problem. You are then Sophisticated. But read (and heed) the warnings - sophisticated investors get fewer protections. In reality I'm sure that there will be time for this to be implemented. No need for a forced sell, and even with sophisticated products it normally only covers new investments (including re-investing interest and returned capital), so again it shouldn't be a problem. Do you really want 13% of your wealth in one platform, and significantly more than that in P2P? Maybe you are young with a high income and so the loss of 13% of your wealth wouldn't be a great setback? Zopa hasn't made a profit, has been going for 13(? ish) years, hasn't grown that big, has changed strategy every few years, failed to capitalise on its early mover advantage, has new management and the returns aren't that exceptional. Maybe moving a few % from Zopa to FSCS paying 2% (instead of 4%) isn't that bad an idea?
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elliotn
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Post by elliotn on Aug 7, 2018 15:35:29 GMT
Do they specify equity investment? Have lent on plenty of fixed income investments in unlisted co’s. But does seem Seedrs might be in order, although equity investments do pop up on C2F so I could keep it in one place with p2p.
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Greenwood2
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Post by Greenwood2 on Aug 7, 2018 15:48:38 GMT
SOPHISTICATED EXAMPLE I confirm that one or more of the following criteria applies to me: 1) I have been a director of a company with an annual turnover of £1 million or more in the last 12 months; 2) I have made more than one investment in an unlisted company in the last year 3) I have been a member of a group of business angels for at least 6 months 4) I have worked in the finance industry in an active professional capacity, financing small and medium firms in the last 24 months. I declare that I am a self-certified sophisticated investor for the purposes of the non-readily realisable securities. I understand this means: (a) I can receive promotional communications made by a person who is authorised by the Financial Conduct Authority which relate to investment activity in non-readily realisable securities; (b) the investments to which the promotions will relate may expose me to a significant risk of losing all of the property invested I am a self-certified sophisticated investor because at least one of the following applies: (i) I am a member of a network or syndicate of business angels and have been so for at least the last six months prior to the date below; (ii) I have made more than one investment in an unlisted company in the two years prior to the date below; (iii) I am working, or have worked in the two years prior to the date below, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises; (iv) I am currently, or have been in the two years prior to the date below, a director of a company with an annual turnover of at least £1 million. I accept that the investments to which the promotions will relate may expose me to a significant risk of losing all of the money or other property invested. I am aware that it is open to me to seek advice from someone who specialises in advising on investments. By clicking confirm, I have read and agreed with these terms and conditions thats us bolloxed then unless no 2 fits for Zopa, not sure if Zopa is listed or unlisted probably unlisted so I might pass muster. Although I notice that item "ii" might stumble me again. I'm not selling though without a lot of kicking and screaming! I think the FCA are saying long term existing P2P lenders would be granted Grandfather rights, ie, they wouldn't be subject to the new requirements, exactly how this would work we will have to wait and see. And it might well be just for the platform(s) you have been invested in long term.
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aju
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Post by aju on Aug 7, 2018 15:53:09 GMT
thats us bolloxed then unless no 2 fits for Zopa, not sure if Zopa is listed or unlisted probably unlisted so I might pass muster. Although I notice that item "ii" might stumble me again. I'm not selling though without a lot of kicking and screaming! Two £10 investments on Seedrs every two years will enable you to tick box ii. You will have to claim on Seedrs that you will limit your investments to no more than 10% of your wealth which won't be a problem. You are then Sophisticated. But read (and heed) the warnings - sophisticated investors get fewer protections. In reality I'm sure that there will be time for this to be implemented. No need for a forced sell, and even with sophisticated products it normally only covers new investments (including re-investing interest and returned capital), so again it shouldn't be a problem. Do you really want 13% of your wealth in one platform, and significantly more than that in P2P? Maybe you are young with a high income and so the loss of 13% of your wealth wouldn't be a great setback? Zopa hasn't made a profit, has been going for 13(? ish) years, hasn't grown that big, has changed strategy every few years, failed to capitalise on its early mover advantage, has new management and the returns aren't that exceptional. Maybe moving a few % from Zopa to FSCS paying 2% (instead of 4%) isn't that bad an idea? I didn't mention that I already have a lot in FSCS covered lending but it doesn't pay that well < inflation is not an option for me, especially since my DD's source dried up etc etc. I'm not employed just living off the fruits of my good fortune over the years and the odd kings shilling here and there taboot, so called fat cat pensions etc, etc etc. I'm actually retired and have been for over 10 years at a very early age although i'm getting close to the SPA now. I have not really done a days paid work since apart from the odd mail sorting at christmas when I first quit the rat race. Got bored with that after about 3 stints and the RM taking the piss with casual labour that i wasn't happy with so I gave that up. In the words of Ian Dury's "Tricking Dicky", "... and I'm doing very well", no the other half is not Nina and I don't have a Cortina, wish i did must worth a bob or two these days. Of course all the sophisticates on here might think somewhat differently and I may be a bit stretched in many peoples eyes. to be honest its a bit of a risk but as i said above I have been on Zopa investing for a looooooong time, but hey I guess it could all go wrong, Psst don't mention this to Mrs Aju though. I would also add that I have enough time on my hands to have garnered more goodwill than interest this year so far - Yeah i know i am a serial complainer as well but for me as long that makes better than £30 and hour then its worth it for us. Oops gone off topic slightly, sorry.
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pikestaff
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Post by pikestaff on Aug 7, 2018 17:22:43 GMT
Do they specify equity investment? Have lent on plenty of fixed income investments in unlisted co’s. But does seem Seedrs might be in order, although equity investments do pop up on C2F so I could keep it in one place with p2p. On a natural reading of the words, "investment in an unlisted company" includes investments in unlisted company debt - which would include p2b if the business is a company (at least when lending directly, and not via a packaged account).
Whether this is what the FCA wants it to mean is another matter...
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jlend
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Post by jlend on Aug 7, 2018 20:25:22 GMT
Do they specify equity investment? Have lent on plenty of fixed income investments in unlisted co’s. But does seem Seedrs might be in order, although equity investments do pop up on C2F so I could keep it in one place with p2p. On a natural reading of the words, "investment in an unlisted company" includes investments in unlisted company debt - which would include p2b if the business is a company (at least when lending directly, and not via a packaged account).
Whether this is what the FCA wants it to mean is another matter...
That is my understanding and is also related to why platforms call us investors rather than lenders or savers. In the past some of the platforms referred to us as lenders.
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jlend
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Post by jlend on Aug 7, 2018 20:42:19 GMT
'The FCA has suggested that P2P lenders could be limited to sophisticated investors or high-net-worth individuals who are fully aware of the risk involved in P2P lending. The regulator has also proposed that all investors should be limited to investing a maximum of ten per cent of their net investible portfolio in P2P.'
I can't see how they would be able to enforce a limit, maybe they will simply suggest a sensible investment level, which would effectively make no difference.
The FCA have done the same thing with many other non mainstream investments like venture capital trusts over the years. Am sure the FCA can come up with some suitable and sensible guidelines that would work for p2p and would not be too onerous on the platforms. Reading some of the posts across this forum, i think it is needed. There are quite a few posters who have said they did not realise how risky p2p was and over invested in one way or another in indivual loans, accounts or platforms. I think the very light touch regulation of p2p was always going to get beefed up at some stage as it grows. I don't think it is sustainable that it has relatively little regulation compared with many other alternative investments.
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Post by samford71 on Aug 8, 2018 7:37:08 GMT
jlend alludes, in my view, to the correct point. I can see the FCA have a couple of basic problems. First, too many retail investors still are seeing P2P as a replacement for cash deposits and that is simply wrong. The difficulty is that it's a big ask to expect many retail investors to understand where P2P sits in the risk-return hierarchy. Even more important, that the risk spectrum inside P2P itself is huge. It's hard to put a highly speculative development loan under the same umbrella as say prime consumer loans or residential property. The second issue is risk management by investors, or rather the total lack of it. We only have to sample this forum to see the concentration risk some people take to platforms and loans is far too high. Many people have far too high a degree of conviction on platforms and/or specific loans. Too much confidence in their ability to judge risk-return. So I can see why the FCA feels the need to clamp down. It's a nailed-on mis-selling scandal. The question really is whether 10% is an appropriate criteria. Personally, I'm not a fan of hard limits: circumstances vary over time so to attempt to put a hard limit on an allocation seems inflexible. I am a fan of what might be termed "advisory limits" i.e. saying that an exposure over 10% is not advised and if you want to go above that then you might want to take a hard look at whether this is optimal or appropriate and revisit that question regularly. The question for anyone with say 30% of their net worth in P2P should be: would you be happy having 30% of your net worth in emerging market sovereign debt funds or speculative-grade (junk) bond funds, because if the answer is no, then why are you sitting with 30% in something that on average is probably of comparable risk but with inferior operational controls, a weaker regulatory environment, more counterparty risk, higher fees etc.
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empirica
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Post by empirica on Aug 8, 2018 8:54:17 GMT
jlend alludes, in my view, to the correct point. I can see the FCA have a couple of basic problems. First, too many retail investors still are seeing P2P as a replacement for cash deposits and that is simply wrong. The difficulty is that it's a big ask to expect many retail investors to understand where P2P sits in the risk-return hierarchy. Even more important, that the risk spectrum inside P2P itself is huge. It's hard to put a highly speculative development loan under the same umbrella as say prime consumer loans or residential property. The second issue is risk management by investors, or rather the total lack of it. We only have to sample this forum to see the concentration risk some people take to platforms and loans is far too high. Many people have far too high a degree of conviction on platforms and/or specific loans. Too much confidence in their ability to judge risk-return. So I can see why the FCA feels the need to clamp down. It's a nailed-on mis-selling scandal. Is there no element of caveat emptor here? Platforms do the necessary* risk-warnings on web sites and emails, and this isn't a situation where a provider is saying 'you can have A but only if you also have B, even though it's clear you don't want or need B'.
So, why 'mis-selling'? And why so 'nailed-on'?
* - 'necessary' as in the minimum required. Whether that minimum is sufficient to protect the willingly ignorant from themselves is another matter, but people still choose to smoke, and choose not to wear seatbelts, so legislation / regulation / risk warnings can only go so far.
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unless no 2 fits for Zopa, not sure if Zopa is listed or unlisted probably unlisted so I might pass muster. Although I notice that item "ii" might stumble me again. 
