mikeh
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Post by mikeh on Jul 23, 2019 13:56:49 GMT
Taken from the final paragraph of that Times article, "A spokesman for the FCA said authorising Lendy left it “better able to take any necessary action to protect the interests of consumers”. A decision to not authorise may have left Lendy unable to trade, he added. “This could have led to increased consumer harm.”" Seems a very strange kind of regulatory logic was used. Maybe they learnt something from Collateral? Indeed. Not sure it was the right lesson though.
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Post by brightspark on Jul 23, 2019 16:29:47 GMT
I'm gob-smacked. So the FCA initially held back on performing their regulatory duties because Lendy would not have been able to continue to trade? That would have been awful!
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Post by billy169 on Jul 23, 2019 16:58:44 GMT
Couldn't make it up...but starting to see many loopholes and clever words for everyone to blame everyone else...not looking good for us.
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Monetus
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Post by Monetus on Jul 23, 2019 18:43:20 GMT
July 13th 2018: Following a detailed end to end assessment of its business and operating model, Lendy’s secured lending model was authorised by the FCA, the UK’s financial regulator.
Lendy launched in 2012 and has to date facilitated over £400m in lending. It currently has 21,500 registered investors and will continue with its existing investments.
However, now it has a new FCA-approved mandate, it will look to innovate new products and services in line with its full FCA permissions.
Liam Brooke, chief executive of Lendy Ltd, said the platform was very pleased to have been given full authorisation by the FCA. “It has been a long and sometimes challenging journey, which has involved a detailed review of our processes and policies and has helped us mature into a stronger and more robust business,” he explained.
320 days later...
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Post by rooster on Jul 23, 2019 19:43:32 GMT
Agreed / interesting / thank you. Is this something that is likely to be covered by any Creditors Committee (understanding that not of the details may be made public)? I believe this is outside of the remit of the CC as it’s more of a legal/regulatory matter. Mis-sold investors who didn’t receive the compensation they were entitled to prior to Lendy’s collapse are now likely to be classified as unsecured creditors in the administration so their prospects for recovery are pretty bleak indeed. 1) There’s also the question of why the FCA gave their seal of approval to Lendy in July 2018 knowing full well they had mis-sold loans and to quote Lord Myners: “Whether the FCA’s authorisation gave it a sense of regulatory approval and endorsement, which encouraged people to feel they had been vetted.” 2) a) Was the FCA’s full authorisation entirely appropriate given there were confirmed cases of mis-selling b) And did it encourage people to invest and put further capital at risk? 3) Should dividends have been paid and assets moved to group companies when Lendy still owed 600k in remediation payments to mis-sold investors? Complex times indeed... Respectfully, these questions don't seem complex at all to me. Answers are: 1) Because it's rubbish 2a) No 2b) Yes 3) No Now RSM are contracted to charge us all 1 million pounds for those answers over the next 12 months, but I've beaten them to it and you can have those answers for free 
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zlb
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Post by zlb on Jul 24, 2019 10:10:50 GMT
Agreed / interesting / thank you. Is this something that is likely to be covered by any Creditors Committee (understanding that not of the details may be made public)? I believe this is outside of the remit of the CC as it’s more of a legal/regulatory matter. Mis-sold investors who didn’t receive the compensation they were entitled to prior to Lendy’s collapse are now likely to be classified as unsecured creditors in the administration so their prospects for recovery are pretty bleak indeed. There’s also the question of why the FCA gave their seal of approval to Lendy in July 2018 knowing full well they had mis-sold loans and to quote Lord Myners: “Whether the FCA’s authorisation gave it a sense of regulatory approval and endorsement, which encouraged people to feel they had been vetted.” Was the FCA’s full authorisation entirely appropriate given there were confirmed cases of mis-selling and did it encourage people to invest and put further capital at risk? Should dividends have been paid and assets moved to group companies when Lendy still owed 600k in remediation payments to mis-sold investors? Complex times indeed... Should they have advertised that they had OFT approval and then FCA interim permissions on this forum, (2013/4) if those permissions amounted to nothing? Advertising a form of permission to retail investors implies that the form of permission is of meaningful value to those retail investors.
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Monetus
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Post by Monetus on Jul 24, 2019 10:23:46 GMT
I believe this is outside of the remit of the CC as it’s more of a legal/regulatory matter. Mis-sold investors who didn’t receive the compensation they were entitled to prior to Lendy’s collapse are now likely to be classified as unsecured creditors in the administration so their prospects for recovery are pretty bleak indeed. There’s also the question of why the FCA gave their seal of approval to Lendy in July 2018 knowing full well they had mis-sold loans and to quote Lord Myners: “Whether the FCA’s authorisation gave it a sense of regulatory approval and endorsement, which encouraged people to feel they had been vetted.” Was the FCA’s full authorisation entirely appropriate given there were confirmed cases of mis-selling and did it encourage people to invest and put further capital at risk? Should dividends have been paid and assets moved to group companies when Lendy still owed 600k in remediation payments to mis-sold investors? Complex times indeed... Should they have advertised that they had OFT approval and then FCA interim permissions on this forum, (2013/4) if those permissions amounted to nothing? Advertising a form of permission to retail investors implies that the form of permission is of meaningful value to those retail investors. A valid point. Lendy wrote 95% of its business prior to full authorisation so you could argue that the "damage was already done" by the time full authorisation was granted. It's part of a broader question of whether "light touch" FCA regulation under Interim permissions was entirely appropriate for the wider P2P sector given it has seemingly allowed unqualified, unethical and inexperienced people, without checks or supervision, to manage hundreds of millions of pounds of other people’s money, for principally their own benefit and in direct conflict with the interests of investors. If Interim/CC authorisation amounted to pretty much bugger all perhaps The FCA should have just said "look we're not going to touch this" rather than offering the illusion of endorsement and approval via FCA regulation?
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keystone
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Post by keystone on Jul 24, 2019 10:34:01 GMT
I believe this is outside of the remit of the CC as it’s more of a legal/regulatory matter. Mis-sold investors who didn’t receive the compensation they were entitled to prior to Lendy’s collapse are now likely to be classified as unsecured creditors in the administration so their prospects for recovery are pretty bleak indeed. There’s also the question of why the FCA gave their seal of approval to Lendy in July 2018 knowing full well they had mis-sold loans and to quote Lord Myners: “Whether the FCA’s authorisation gave it a sense of regulatory approval and endorsement, which encouraged people to feel they had been vetted.” Was the FCA’s full authorisation entirely appropriate given there were confirmed cases of mis-selling and did it encourage people to invest and put further capital at risk? Should dividends have been paid and assets moved to group companies when Lendy still owed 600k in remediation payments to mis-sold investors? Complex times indeed... Should they have advertised that they had OFT approval and then FCA interim permissions on this forum, (2013/4) if those permissions amounted to nothing? Advertising a form of permission to retail investors implies that the form of permission is of meaningful value to those retail investors. Indeed, safeties in place if things go wrong is a pretty strong selling point. www.youtube.com/watch?v=iAAmts-TdGg&t=12m17s
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zlb
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Post by zlb on Jul 24, 2019 10:45:20 GMT
Should they have advertised that they had OFT approval and then FCA interim permissions on this forum, (2013/4) if those permissions amounted to nothing? Advertising a form of permission to retail investors implies that the form of permission is of meaningful value to those retail investors. A valid point. Lendy wrote 95% of its business prior to full authorisation so you could argue that the "damage was already done" by the time full authorisation was granted. It's part of a broader question of whether "light touch" FCA regulation under Interim permissions was entirely appropriate for the wider P2P sector given it has seemingly allowed unqualified, unethical and inexperienced people, without checks or supervision, to manage hundreds of millions of pounds of other people’s money, for principally their own benefit and in direct conflict with the interests of investors. If Interim/CC authorisation amounted to pretty much bugger all perhaps The FCA should have just said "look we're not going to touch this" rather than offering the illusion of endorsement and approval via FCA regulation? For me the full authorisation meant nothing, as I'd already decided to try to 'get out'. My investments were stuck long term in loans I'd naively trusted the loan updates for 'repayment due in three weeks' and bought on the SM, when I first tried the platform out. By the time I'd learned which matrix of characteristics to risk investing in, and that loan flipping was the only thing to do, it was too late - I managed to get my later investments out but not the ones stuck from the beginning, or a couple from a bit later. My point would be that retail investors wouldn't know that interim permissions were "light touch", or tantamount to none in this particular case. There's a lot to unpick, including arguments around mis-management through lack of ability; and the wrong personality being in charge.
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Monetus
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Post by Monetus on Jul 24, 2019 11:22:20 GMT
Indeed. I think the vast majority of people got "stuck" once it had fully dawned upon them what they had gotten into.
It only takes a few minutes browsing through the LAG Facebook group to see just how many retail investors have overextended themselves or invested their life savings/pension assuming that it was safe due to being "secured on property with a maximum LTV of 70%"
Dualinvestor also makes some interesting points on another forum:
"Development loans are valued on the fiction called Long Term Gross Development Value ("LTGDV") a hypothetical figure of what the completed project will be worth in x years time if all the assumptions therein actually happen as predicted. Until that completion the actual value from time to time is not ascertainable in any way by referennce to LTGDV, e.g. a project with a LTGDV of £10 million is not worth £5 million just because it is 50% complete. In fact, particularly in the early stages, a project may have a negative value because the cost and restoring the land to its original condition may exceed the land value.
So when a platform offers a £1 million first tranche on the aforementioned loan claiming it represents 10% LTGDV it is so misleading in practical terms to be a lie, it may represent the figure quoted but is almost certainly more than 100% of the actual value of the development at that time. If the developer went pop, a very common occurance in the case of Lendy where apparently approximately two thirds of their borrowers have, the lenders have no chance of recouping that £1million from the project notwithstanding that the impecunious borrower only received about £800,000 anyway, if the loan was from Lendy.
DD has its place for informing prospective lenders who owns a particular piece of land, it has requisite planning permission for x apartments, there are no restrictions or ransom strips (something that even platforms failed to pick up on a few occasions), you may also ascertain that a borrower has several other ongoing projects and has or has not completed any of them, but it is useless in predicting whether the borrower has the financial wherewithal and skills to complete the project and whether the assumptions used in ascertaining the LTGDV are correct and whether there will be sufficient demand in x years time to sell the development. And none of that even considers the platform risk.
I would say there are fewer than 10,000 people in the UK who can properly assess the risks when writing development loans and the vast majority of those are past or present finance professionals, I do not count myself amongst them, and I do not think Lendy Collateral or several other platforms employed or used as a consultant one of those people.
Retail investors have no place in development loans, probably most property loans, it is a function that should be exclusively in the hands of professionals and god knows they often cock it up!"
Was this product really suitable for retail investors at all one might ask?
Are retail investors able to adequately assess and price the risks of complex development loans on a platform that was a "lender of last resort" to many borrowers paying 30% interest rates?
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Post by brightspark on Jul 24, 2019 11:30:03 GMT
FCA will (rightfully?) argue that, as 95% of Lendy business was written prior to full authorisation, that the full authorisation did what it was supposed to do i.e. to curtail unacceptable practices of Lendy. Once Lendy was straight-jacketed it could no longer continue to generate sufficient income using its defective business model and was forced into Administration. FCA will have on file a host of documents detailing the authorisation process with Lendy having foot-dragged probably to delay the inevitable If this is a correct analysis investors will not succeed in pinning much of the blame for losses on the Regulator.
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Post by billy169 on Jul 24, 2019 11:31:25 GMT
I've been jumping from site to site..I may have missed something.
Have RSM said when we can expect anything back.,HQ etc..and who gets the interest on anything in the bank ?
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Monetus
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Post by Monetus on Jul 24, 2019 11:43:19 GMT
FCA will (rightfully?) argue that, as 95% of Lendy business was written prior to full authorisation, that the full authorisation did what it was supposed to do i.e. to curtail unacceptable practices of Lendy. Once Lendy was straight-jacketed it could no longer continue to generate sufficient income using its defective business model and was forced into Administration. FCA will have on file a host of documents detailing the authorisation process with Lendy having foot-dragged probably to delay the inevitable If this is a correct analysis investors will not succeed in pinning much of the blame for losses on the Regulator. Lendy had to apply for full authorisation by 1st October 2016 and we are told their application was submitted in mid 2016 so the FCA took around 2 years to approve them. During this waiting period they originated more than 100m of new business. Given they were one of Europe's largest P2P platforms and accelerating loan origination at a "gargantuan" rate, I can only assume the FCA either had serious issues with their business model or were perhaps just very busy: uk.reuters.com/article/uk-britain-tech-regulations/fca-warns-of-bottleneck-in-p2p-platform-approvals-idUKKCN0WX18DA lot of the larger P2P platforms were approved first. I believe Lendy were one of the last although you're absolutely right - many of the big platforms did apply much earlier and prior to the deadline.
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zlb
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Post by zlb on Jul 24, 2019 12:19:56 GMT
None of this www.p2pfinancenews.co.uk/2019/07/17/what-will-the-appropriateness-test-actually-look-like/weeds out problems with the platform, its personalities and capabilities there, or the loan structure, or trusting that the company is doing what they say they are doing e.g. they aren't arbitrarily spilling PBL money into DFL and promising a DFL loan in order to attract the borrower. Nor what the company advertises, including that they will never lend to borrowers without a proven track record - ref the farm loan where the farming community were aware of the borrower never paying back on any loans. Or they advertise repeatedly that they can offer 12% because they are fintech/P2P so can afford to do so, rather than the other reason that they were selecting borrowers of last resort especially for their investors, yet passing them off as reliable and successful (the clue was in their not sharing info about borrowers - anyone remember that post saying that they are not allowed to share info about their borrowers?). The new FCA regs should mandate that borrowers have to be revealed. |
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Post by billy169 on Jul 24, 2019 13:18:29 GMT
Oh bugger
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