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Post by equity on Jun 13, 2020 15:24:27 GMT
Hi all,
I've been a long-time lurker on this board - apologies for the lack of contributions.
I also understand that we are likely to hear from GS on Monday. My prediction (no surprises) will be that they will declare the RE immediately as they are obliged to do given the absence of a solution to the LE.
I have a very significant investment in GS as I pulled out of all other P2P platforms well before Covid and doubled down (multiple times over) on GS, which has proven to be an expensive lesson in diversification for me. Frustratingly, loans in which I am heavily invested fall to be repaid in the course of next week, so I'll likely be almost entirely invested at the time that the RE is declared. It is frustrating that some people, by sheer chance, will be able to withdraw good sums, but it is (as others have said previously) a result of how the platform is set up and FCA rules on 'client money'.
Despite all of our collective frustration, the underlying loan book is strong - the number of borrowers is not huge and (I would hope that) the amount of research and DD that went into each borrower was therefore substantial and rigorous. Hopefully the bulk of our funds will be repaid in shortish order after GS calls in the debts.
I still hold a glimmer of hope that they announce the completion of a big sale of the loan book on Monday morning, but even if so I can't see that resolving the LE given how most people presumably want their money back ASAP.
My remaining worry is that the same employees/officers will run the residual body (forgot what it's called) that will administer the remaining loans, and so will profit from our misery as locked-in investors. There's also a perverse incentive for them to drag out the realisation process to extract salaries and other remuneration for as long as possible at our collective expense.
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Post by garreh on Jun 13, 2020 16:59:34 GMT
It is frustrating that some people, by sheer chance, will be able to withdraw good sums, but it is (as others have said previously) a result of how the platform is set up and FCA rules on 'client money'. I'm not convinced it's entirely down to FCA rules and 'client money' - when a Resolution Event is called I'd imagine it's not considered client money, any more than it's considered client money when it's repaid back to investors during a Liquidity Event. It's just an oversight in GS terms - most likely they just thought it was the simplest thing to do in such an event. In hindsight it is unfair that someone investing 100k could get back 100k day the Resolution Event is called - whereas someone who's only invested 5k may not see that money for years, and possibly with a hit to capital. There is a responsibility for companies to ensure there is fair and balance - this certaintly is not the case here, so it would be interesting to see a legal perspective on it. We're talking about an investment company with a huge loan book and pool of investors, it's not a trivial thing to overlook. Hopefully the bulk of our funds will be repaid in shortish order after GS calls in the debts. By shortish I would assume you mean years? Assuming trends continue and we see around 10% reduction in utilisation every 3 months - it'll take around 2.5 years to clear the loan book - but that's a very optimistic timescale and doesn't account for defaults, recoveries, administration time, etc. I would easily double that to 5 years. I could be way off with those figures though, so take it with a grain of salt. It's just my best guess given we aren't receiving any projections from GS. My remaining worry is that the same employees/officers will run the residual body (forgot what it's called) that will administer the remaining loans, and so will profit from our misery as locked-in investors. There's also a perverse incentive for them to drag out the realisation process to extract salaries and other remuneration for as long as possible at our collective expense It's quite possible this is what GS meant when they said they "hope to continue for many years to come" - profiting from our misery, probably. Who knows. Their terms state they can use any repayments "which it reasonably believes will maximise the probability of borrower repayment [clause 6.7]" so that is somewhat vague - could it mean bonuses and higher salaries for GS to keep them "motivated" to getting the best returns? I would like to see a statement from them about their operating costs and expectations going forwards - it's not unreasonable to have this be public knowledge, much like Assetz Capital have done where they have released a statement about how they have reduced operating costs by 50%, reduced bonuses and staff salaries. It would be great if GS did this and put the savings to topping up the Provision Fund. Again, I suspect GS are keeping quiet about this stuff as not to cause unnecessary attention and scrutinisation. Remaining cautiously optimistic, as depoyment rate is at 75% now.
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Jun 13, 2020 17:21:38 GMT
I'm not sure any funds will be available to withdraw if they are all rolled over to the borrowers.
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Post by garreh on Jun 13, 2020 17:28:50 GMT
I'm not sure any funds will be available to withdraw if they are all rolled over to the borrowers. It states this would be the case in black and white in their terms. What part are you unsure about? Essentially this means on the day the Resolution Event is declared utilisation will go up to 100% - any future payments will be held by GSP and shared quartley to investors. It's dishing of the intial amount (currently around 25%) that is unfair - as it's a complete luck of the draw how much you'll get, all dependent on what loans your invested into at the time it's called.
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Post by equity on Jun 13, 2020 17:58:27 GMT
It is frustrating that some people, by sheer chance, will be able to withdraw good sums, but it is (as others have said previously) a result of how the platform is set up and FCA rules on 'client money'. I'm not convinced it's entirely down to FCA rules and 'client money' - when a Resolution Event is called I'd imagine it's not considered client money, any more than it's considered client money when it's repaid back to investors during a Liquidity Event. It's just an oversight in GS terms - most likely they just thought it was the simplest thing to do in such an event. In hindsight it is unfair that someone investing 100k could get back 100k day the Resolution Event is called - whereas someone who's only invested 5k may not see that money for years, and possibly with a hit to capital. There is a responsibility for companies to ensure there is fair and balance - this certaintly is not the case here, so it would be interesting to see a legal perspective on it. We're talking about an investment company with a huge loan book and pool of investors, it's not a trivial thing to overlook. I can actually give you a legal explanation here (though I'd rather not have my credentials probed as this is an anon forum - so take the following with the usual caveats that this is just the explanation of a stranger online). What you say may be right - it is certainly a possibility that this is caused by GS's oversight in structuring the investment vehicle in the way in which they have. However, to the best of my knowledge, there was no easy way to avoid this issue. Without going into the technicalities, the FCA rules require that client money - that is, uninvested funds which clients pay into the platform to be 'invested' in loans / other investment products - are held in a separate account on trust for the clients, so as to protect against ( inter alia) the platform operator's insolvency. It follows from the myriad rules on how client money is to be handled that, unless and until the amount standing to the credit of a client is invested into the underlying loans, that client is free to call upon the return of his funds subject to any agreed terms which require that client to leave his money in the platform (e.g. the terms stipulating that upon the happening of the LE we are unable to withdraw our funds and are forced to elect to reinvest perpetually until the LE is resolved). Again, without going into technicalities, there are rules which restrict the ability of GS even to agree terms with their clients (i.e. the investors) to the effect that, upon the happening of a RE following a LE, all uninvested funds standing to the credit of clients' accounts will be paid to the trustee to be aggregated with all loan repayments and other assets, to be rateably distributed between all investors (as will be the case for all loans upon the happening of the RE). This is just one example of many where the application of regulations which are intended to protect the majority of consumers have unintended and negative consequences for a sub-class. There is a way in which GS could lawfully have made this work within the regulations: they could have provided that the financial product which investors are 'buying into' is the overall P2P lending platform, and that as soon as their money is invested into the platform, it is 'invested' with a rate of return which depends on how the underlying funds are lent. Imagine a 'black box' into which your money goes, to be invested as and when possible, but which is no longer sitting idle 'awaiting investment' from the investor's point of view. This would look very odd, and GS would have to justify why it is that you invest your money and yet don't earn interest for some time, and then go on to earn variable rates of interest which you cannot understand. The obvious criticism of such a model would be that the platform does not operate transparently, and investors would hardly be 'won round' by the explanation that the 'black box' is necessary so as to ensure a fair and rateable distribution between all investors if a RE is called! I have sympathy for the reason why we are at the mercy of a lottery as regards funds 'on the market' at the time that the RE is called, even though I stand to lose significantly as a result of the set up. That said, I have many (many) other serious criticisms of how GS has operated the platform. (I don't want to be seen as a GS apologist).
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Post by garreh on Jun 13, 2020 18:32:50 GMT
I'm not convinced it's entirely down to FCA rules and 'client money' - when a Resolution Event is called I'd imagine it's not considered client money, any more than it's considered client money when it's repaid back to investors during a Liquidity Event. It's just an oversight in GS terms - most likely they just thought it was the simplest thing to do in such an event. In hindsight it is unfair that someone investing 100k could get back 100k day the Resolution Event is called - whereas someone who's only invested 5k may not see that money for years, and possibly with a hit to capital. There is a responsibility for companies to ensure there is fair and balance - this certaintly is not the case here, so it would be interesting to see a legal perspective on it. We're talking about an investment company with a huge loan book and pool of investors, it's not a trivial thing to overlook. Again, without going into technicalities, there are rules which restrict the ability of GS even to agree terms with their clients (i.e. the investors) to the effect that, upon the happening of a RE following a LE, all uninvested funds standing to the credit of clients' accounts will be paid to the trustee to be aggregated with all loan repayments and other assets, to be rateably distributed between all investors (as will be the case for all loans upon the happening of the RE). This is just one example of many where the application of regulations which are intended to protect the majority of consumers have unintended and negative consequences for a sub-class. I'm clearly not as qualified as you are in this regard, so thank you for the detailed explantation. I'm curious though, how is it possible the likes of Assetz Capital and Ratesetter have managed to essentially call a never-ending Liquidity Event (by restricting withdawals) and is not subject to the same 'client money' rules? I suspect they operate a different model, similar to the one you explained about investing in the 'platform' - but I do see similarities between investing in e.g. an Assetz Capital / Ratesetter 30-day access and a Growth Street which is essentially 30 day access thru rolling contracts. It's probably seen as a different model, or maybe they are doing something shady and GS is doing the right thing legally, even if it's not exactly fair.
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delboy
Member of DD Central
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Post by delboy on Jun 13, 2020 18:35:48 GMT
Frustratingly, loans in which I am heavily invested fall to be repaid in the course of next week, so I'll likely be almost entirely invested at the time that the RE is declared. It is frustrating that some people, by sheer chance, will be able to withdraw good sums, but it is (as others have said previously) a result of how the platform is set up and FCA rules on 'client money'. Sorry to sound dim, but could someone please explain what a favourable position might look like in terms of one's investments at the time the RE is called? I have no cash in 'holding', a good chunk on loan and a fair bit on market (against my will, of course). I assume it is bad to be invested and 'good' (as it can be in the circumstances) to be on market? What is likely to happen to money on the market?
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Post by garreh on Jun 13, 2020 19:11:38 GMT
Frustratingly, loans in which I am heavily invested fall to be repaid in the course of next week, so I'll likely be almost entirely invested at the time that the RE is declared. It is frustrating that some people, by sheer chance, will be able to withdraw good sums, but it is (as others have said previously) a result of how the platform is set up and FCA rules on 'client money'. Sorry to sound dim, but could someone please explain what a favourable position might look like in terms of one's investments at the time the RE is called? I have no cash in 'holding', a good chunk on loan and a fair bit on market (against my will, of course). I assume it is bad to be invested and 'good' (as it can be in the circumstances) to be on market? What is likely to happen to money on the market? Look under "Your loans" and check the Contract Repayment Date - if it's due to end on or a few days before 15th June (maybe even up to a week before), chances are you'll get that money once RE is called. Possibly money already sitting in your holding account too. Not a guarantee, but probability is high.
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Jun 13, 2020 19:39:14 GMT
I'm not sure any funds will be available to withdraw if they are all rolled over to the borrowers. It states this would be the case in black and white in their terms. What part are you unsure about? Essentially this means on the day the Resolution Event is declared utilisation will go up to 100% - any future payments will be held by GSP and shared quartley to investors. It's dishing of the intial amount (currently around 25%) that is unfair - as it's a complete luck of the draw how much you'll get, all dependent on what loans your invested into at the time it's called. Is anything unmatched if it is instantly rolled? I don't know.
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Post by garreh on Jun 13, 2020 19:55:36 GMT
It states this would be the case in black and white in their terms. What part are you unsure about? Essentially this means on the day the Resolution Event is declared utilisation will go up to 100% - any future payments will be held by GSP and shared quartley to investors. It's dishing of the intial amount (currently around 25%) that is unfair - as it's a complete luck of the draw how much you'll get, all dependent on what loans your invested into at the time it's called. Is anything unmatched if it is instantly rolled? I don't know. It's not instantly rolled. It takes time to match to a new order - currently there is 25% spare liquidity and average 8 days to match. So if you have unmatched money when the RE is called - it will be moved to your holding account and is essentially then cash for you to withdraw.
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Post by equity on Jun 13, 2020 20:13:49 GMT
Again, without going into technicalities, there are rules which restrict the ability of GS even to agree terms with their clients (i.e. the investors) to the effect that, upon the happening of a RE following a LE, all uninvested funds standing to the credit of clients' accounts will be paid to the trustee to be aggregated with all loan repayments and other assets, to be rateably distributed between all investors (as will be the case for all loans upon the happening of the RE). This is just one example of many where the application of regulations which are intended to protect the majority of consumers have unintended and negative consequences for a sub-class. I'm clearly not as qualified as you are in this regard, so thank you for the detailed explantation. I'm curious though, how is it possible the likes of Assetz Capital and Ratesetter have managed to essentially call a never-ending Liquidity Event (by restricting withdawals) and is not subject to the same 'client money' rules? I suspect they operate a different model, similar to the one you explained about investing in the 'platform' - but I do see similarities between investing in e.g. an Assetz Capital / Ratesetter 30-day access and a Growth Street which is essentially 30 day access thru rolling contracts. It's probably seen as a different model, or maybe they are doing something shady and GS is doing the right thing legally, even if it's not exactly fair. From what I understand of Assetz Capital and Ratesetter (largely from earlier posts in this thread), they have been able to avoid this cliff edge situation which GS investors are in because their T&Cs allow for them to amend the withdrawal process and implement a queued withdrawal system, whereas GS's terms disallow any amendment to the T&Cs during a LE. This is pretty bad drafting and this should have been foreseen as an obvious problem waiting to emerge. The blame more proximately lies with the lawyers who drafted these terms, though arguably the blame lies with GS too if they cheaped out instead of retaining a solid firm to draft the terms. To my mind, it seems fairly like that if a LE is called and is not resolved fairly quickly, that GS may wish to amend the withdrawal terms (e.g. by implementing a queued system) to assist in resolving a liquidity problem, but clearly no thought was given to this and the bluntly drafted terms prevent them from making such a change in the middle of a LE. As someone said a while ago in this thread, GS have truly managed to shoot themselves in both feet. Neither Assetz Capital nor Ratesetter are doing anything shady (that I know of anyway). Their terms are just more flexible and allow them to circumvent this situation through queued withdrawals. If it is the case that upon a winding up, uninvested funds in those platforms are aggregated with invested funds, then that would surprise me - it may be that their investment terms create a different 'model' whereby that is possible, but I really don't know as I've never read their terms and don't know what happens on a winding up for their investors.
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Post by hoy on Jun 14, 2020 11:55:00 GMT
I see Growth Street are matching orders today using money previously not on loan for several days.
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Post by mitosan on Jun 14, 2020 21:07:30 GMT
I see Growth Street are matching orders today using money previously not on loan for several days. Yes, was hoping I'd be able to withdraw that tomorrow Good luck everyone!
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Greenwood2
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Post by Greenwood2 on Jun 15, 2020 6:50:25 GMT
Has everyone taken screen shots, downloads, etc of their accounts and any other information they might want? Just in case the possible RE means a loss of access to part or all of the site.
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puddleduck
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Post by puddleduck on Jun 15, 2020 8:02:24 GMT
I am fairly sanguine about the upcoming Liquidity Event which has always been inevitable I'm afraid.
GS has gone from pretty much 100% funds utilisation to around 75% in 3 months, so I'm fairly optimist more funds will be returned quickly.
Nevertheless there will be losses - the security GS takes tends to be floating charges, nothing too tangible should push come to shove. I expect losses somewhere between 50-75%, although the CBILS magic money tree may encourage natural refinancing at those very low rates.
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