Mousey
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Post by Mousey on Aug 15, 2020 19:39:21 GMT
I doubt very strongly that the cash held in the Access Accounts is covered by the FCA’s intention here. I think what the FCA is saying is that firms should prod clients to withdraw idle cash if the client has no intention of investing it shortly. In AC terms it’d only apply to the Cash Account and to “Total Un-invested Funds“ in MLA. It’s about clients not overlooking making withdrawals they could make unprompted: it’s not about firms “returning” money that can’t be currently withdrawn. I disagree: the FCA letter mentions on several occasions 'Client Money'. If the money hasn't been disbursed to borrowers and/or allocated to a borrower then surely it can only be properly described as client money. Otherwise whose money is it? I remind myself that Assetz are not a bank and they do not have permission to pay 'interest' on 'deposits'. So I submit that the unallocated money held as cash must be client money.
You also say "it’s not about firms “returning” money that can’t be currently withdrawn." - my entire point is that in relation to the unallocated cash - some £25.6m - it can be withdrawn and if the agent is so instructed it should be.
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Mousey
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Post by Mousey on Aug 15, 2020 19:44:52 GMT
Guess it all depends on how you define invested but I suspect that it is invested in the AA as it is receiving interest as such. Same goes for Loanpad. I suspect the FCA is referring to non-earning cash sat in client accounts not that invested in a product whether or not it is specifically invested in loans. Cash is held in the AA as part of the product operation, if the FCA means accounts like the AA then they are effective telling AC to wind the account down. The letter simply refers to client money and "whether the firm needs to hold client money balances which are unlikely to be reinvested". No mention is made about whether that money is earning interest or a 'retainer' or however Assetz dress it up.
The FCA's intention is clear - If the money is unlikely to be reinvested then it needs to be made available for return. My request is that Assetz need to be transparent about what their intentions are.
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ilmoro
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Post by ilmoro on Aug 15, 2020 19:50:43 GMT
Guess it all depends on how you define invested but I suspect that it is invested in the AA as it is receiving interest as such. Same goes for Loanpad. I suspect the FCA is referring to non-earning cash sat in client accounts not that invested in a product whether or not it is specifically invested in loans. Cash is held in the AA as part of the product operation, if the FCA means accounts like the AA then they are effective telling AC to wind the account down. The letter simply refers to client money and "whether the firm needs to hold client money balances which are unlikely to be reinvested". No mention is made about whether that money is earning interest or a 'retainer' or however Assetz dress it up.
The FCA's intention is clear - If the money is unlikely to be reinvested then it needs to be made available for return. My request is that Assetz need to be transparent about what their intentions are.
Have you seen the letter? I assume this is your interpretation of the FCA intention. It also appears to include direct reference to sums not earning interest which firms should consider might be better in clients savings or current accounts. EDIT not actually in the letter it appears just the compliance expert opinion www.thistleinitiatives.co.uk/blog/dear-ceo-letter-increased-client-money-balances/www.fca.org.uk/publication/correspondence/dear-ceo-letter-increased-client-money-balances-covid-19.pdf
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Mousey
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Post by Mousey on Aug 15, 2020 20:14:36 GMT
I've seen the letter and it's linked to in the first post. "This may well be the case if firms do not pay interest on these balances." is not mentioned in the letter which is where one should expect to find such a statement and appears to be the opinion of Thistle Initiatives. In any event the FCA letter refers to "client money balances which are unlikely to be reinvested" which is exactly what my interpretation is based on.
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Mousey
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Post by Mousey on Aug 15, 2020 20:30:38 GMT
@mousey It’s pretty clear the kind of cash the FCA has in mind and unallocated cash in AAs is not covered. The first sentence in the letter states “firms who provide a non-discretionary investment service”. Access Accounts aren’t non-discretionary. AC make all the decisions about which loans to invest in. The MLA is the non-discretionary Service. Terms like “non-discretionary” , “client money” etc have very specific meaning and shouldn’t be lightly guessed on what a lay interpretation might be. I’ll happily butt out here. Each to their own misunderstandings and confusions. The overriding intention of the FCA is that they "expect firms to return client money balances which are unlikely to be reinvested in the short term." There's nothing in the letter that would suggest a difference between the FCA's treatment of non-discretionary and discretionary investments. There's nothing in my understanding of the two terms that would mean client money held would be treated differently across the two categories. I do accept your point that the AA accounts are discretionary but I cannot see a reason why the FCA would apply the advice to only non-discretionary rather than discretionary investments.
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Post by df on Aug 15, 2020 21:23:42 GMT
@mousey It’s pretty clear the kind of cash the FCA has in mind and unallocated cash in AAs is not covered. The first sentence in the letter states “firms who provide a non-discretionary investment service”. Access Accounts aren’t non-discretionary. AC make all the decisions about which loans to invest in. The MLA is the non-discretionary Service. Terms like “non-discretionary” , “client money” etc have very specific meaning and shouldn’t be lightly guessed on what a lay interpretation might be. I’ll happily butt out here. Each to their own misunderstandings and confusions. The overriding intention of the FCA is that they " expect firms to return client money balances which are unlikely to be reinvested in the short term." There's nothing in the letter that would suggest a difference between the FCA's treatment of non-discretionary and discretionary investments. There's nothing in my understanding of the two terms that would mean client money held would be treated differently across the two categories. I do accept your point that the AA accounts are discretionary but I cannot see a reason why the FCA would apply the advice to only non-discretionary rather than discretionary investments. I think in one of the recent communications AC mentioned that they are working on offering new loans to retail investors. Perhaps that justifies the money are likely to be reinvested? 'Short term' is a very vague definition.
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Mousey
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Post by Mousey on Aug 15, 2020 22:21:17 GMT
I think in one of the recent communications AC mentioned that they are working on offering new loans to retail investors. Perhaps that justifies the money are likely to be reinvested? 'Short term' is a very vague definition. Hopefully some transparency will be forthcoming!
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dead-money
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Post by dead-money on Aug 15, 2020 22:34:54 GMT
Sadly, I think the OP is misinterpreting the FCA guidance and grasping at straws.
The cash in the Access accounts is not 'uninvested' it serves a number of purposes which have been discussed to death on this forum.
A comparable example might be an open-ended investment fund; they routinely hold significant cash sums both for liquidity and whilst awaiting investment opportunities.
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Mousey
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Post by Mousey on Aug 15, 2020 23:57:03 GMT
Sadly, I think the OP is misinterpreting the FCA guidance and grasping at straws.
The cash in the Access accounts is not 'uninvested' it servers a number of purposes which have been discussed to death on this forum. A comparable example might be an open-ended investment fund; they routinely hold significant cash sums both for liquidity and whilst awaiting investment opportunities.
The overriding intention of the FCA is that they "expect firms to return client money balances which are unlikely to be reinvested in the short term." There's nothing in the letter that would suggest a difference between the FCA's treatment of non-discretionary and discretionary investments. There's nothing in my understanding of the two terms that would mean client money held would be treated differently across the two categories. I do accept your point that the AA accounts are discretionary but I cannot see a reason why the FCA would apply the advice to only non-discretionary rather than discretionary investments. My 4 questions from post 1 still stand: Assetz should be clear with their investors:
- Did Assetz receive this letter from the FCA?
- What exactly is their plan for the uninvested cash in the Access Accounts?
- Exactly what commitments have been made on behalf of investors for this cash to be used?
- Can Assetz confirm they will "return client money balances which are unlikely to be reinvested in the short term"?
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jlend
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Post by jlend on Aug 16, 2020 8:10:13 GMT
Sadly, I think the OP is misinterpreting the FCA guidance and grasping at straws.
The cash in the Access accounts is not 'uninvested' it servers a number of purposes which have been discussed to death on this forum.
A comparable example might be an open-ended investment fund; they routinely hold significant cash sums both for liquidity and whilst awaiting investment opportunities.
My FCA knowledge is rusty as it has been many years since I worked in the investment banking sector and pre dates p2p so take what I say with a pinch of salt... This is a quote from AC related to the cash in the QAA being uninvested and held in a segregated client account. It is as I would expect. It is difficult to compare the QAA with a open ended investment fund as AC are not authorised or regulated for collective investment schemes, in fact Chris has gone out of his way in the past to say the QAA is not a collective investment scheme. Quote from AC: "The situation is a little more complex with the QAA as it holds some funds “liquid” to facilitate the quick access. These liquid funds are also effectively uninvested in the context of this discussion so they too will be sat in the client account." None the less on putting money into the QAA you are giving AC permission to switch between different loans as loans are added and redeemed in full or in part. "... for clarity, before withdrawal of those investments have completed, there will be a continuing instruction to the Assetz Capital Companies to acquire in the name of the relevant Lending Member an appropriate number and value of Micro Loans in Loans that, under the current published investment criteria of the Investment Accounts or Access Accounts... " Can individual lenders revoke this continuous instruction in order to ask for their client money back? I don't know, but clearly it would make the accounts awfully complicated. Personally I have never seen a continuous instruction that cannot be revoked, but that doesn't mean there isn't one. The liquid cash in the client account in the access accounts was a clever idea as was the continuous rebalancing of loans. It gets around the limitation that AC cannot offer collective investment schemes. We now also have what appears to be a bit weird to me... the situation where cash in the client account in the access account is being sold at a discount. Again it would be complicated if AC tried to work around this, but it does feel a bit strange, I have never seen anything like that personally. I do sometimes doubt this sort of Access account will ever be created again, although it is certainly a clever way of engaging with lenders. The word "invested" IMHO is used quite loosely by AC at times, although I am sure that it not deliberate and the access accounts have worked very well until Covid. Personally I wonder if there isn't a better regulatory framework than p2p for the Access Accounts, or perhaps the p2p regulations need to be clarified to make sure they cover the access accounts. I don't doubt AC have sought advice on what is acceptable.
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Post by nooneere on Aug 16, 2020 8:33:03 GMT
None the less on putting money into the QAA you are giving AC permission to switch between different loans as loans are added and redeemed in full or in part. .... The liquid cash in the client account in the access accounts was a clever idea as was the continuous rebalancing of loans. .... I do sometimes doubt this sort of Access account will ever be created again, although it is certainly a clever way of engaging with lenders. Just an aside to what you are saying. The QAA is not unique - Loanpad operates on a comparable system. That platform has so far traversed coronavirus unscathed, which I attribute to their investor population having greater confidence in the security of their loans. So the question of whether this model has a future is an interesting and important one for P2P.
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jlend
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Post by jlend on Aug 16, 2020 9:29:40 GMT
None the less on putting money into the QAA you are giving AC permission to switch between different loans as loans are added and redeemed in full or in part. .... The liquid cash in the client account in the access accounts was a clever idea as was the continuous rebalancing of loans. .... I do sometimes doubt this sort of Access account will ever be created again, although it is certainly a clever way of engaging with lenders. Just an aside to what you are saying. The QAA is not unique - Loanpad operates on a comparable system. That platform has so far traversed coronavirus unscathed, which I attribute to their investor population having greater confidence in the security of their loans. So the question of whether this model has a future is an interesting and important one for P2P. Absolutely, I have very limited knowledge of Loanpad, there are lots of clever financial products in P2P and elsewhere which are forever looking to make the most of the flexibility in regulations. I actually think that is not a bad thing as long as the regulations and regulator keep up and the offering and risk is clear. Loanpad, Ratesetter, Growthstreet, Assetz capital, Lending Works etc have all done clever things with packaged accounts in the past and are in a variety of positions right now as we can all see. I sold out of the package accounts early in the year pre covid issues as I felt the general risk was increasing. I am pretty agnostic about the AC Access accounts and as I have said in the past I have no intention of putting in a complaint to AC about the accounts. There may well still be good money to be made on these accounts on a risk adjusted basis.
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iRobot
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Post by iRobot on Aug 16, 2020 10:19:41 GMT
TL;DR
The letter was dated 12th August, and just two whole working days have passed since it was received, it will take some time for a platform to internally review the letter and generate a response, possibly requiring legal and/or compliance team input. Let's see what happens over the next week or so.
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I'm reading the letter differently.
The letter opens with: "This letter is only for firms who provide a non-discretionary investment service."
-- Access Accounts are wholly discretionary.
and goes on: "We are aware that clients may have rebalanced their portfolios ... "
-- Access Account clients cannot rebalance their holding within an Access Account, only their exposure to an Access Account
-- clients wishing to reduce their exposure to an Access Account can do so by issuing a Withdrawal Instruction (discounted or otherwise)
-- client monies successfully withdrawn from an Access Account goes in to that client's Cash Account
-- monies in the client's Cash Account can be withdrawn without restriction
-- my interpretation is that these - and only these - are the "client money balances" referred to in the CEO letter
There is then a section relating to suggested action a platform may take around these increased balances and the letter wraps up with: "In line with the above, if it is in clients’ better interests during this period, we expect firms to return client money balances which are unlikely to be reinvested in the short term."
-- certainly it makes no sense for the the client to hold money in their Cash Account, and the recommendation from the FCA is clear: the platform should be nudging clients with positive Cash Account balances that there may be better alternatives for those monies; but ...
-- the letter was dated 12th August, and just two whole working days have passed since it was received
-- it will take some time for a platform to internally review the letter and generate a response, possibly requiring legal and/or compliance team input
Possibly it's an oversimplification but I view the c. 12% of the access account holdings not directly lent out to borrowers as a kind of balance tank; not directly in the main pool of borrower held funds but essential to the overall operation of borrower funding and therefore the performance of the Account.
If I place £10,000 in an Access Account, do I receive interest on the whole of that £10,000 or is a part of it excluded due to it being highlighted as 'uninvested cash'?
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jlend
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Post by jlend on Aug 16, 2020 11:07:23 GMT
This is an interesting question raised by irobot.
"If I place £10,000 in an Access Account, do I receive interest on the whole of that £10,000 or is a part of it excluded due to it being highlighted as 'uninvested cash'?"
Again my knowledge is rusty and pre p2p and what I say is very much academic as far as the interest lenders receive. So take what I say with a pinch of salt again.
AC say the uninvested cash in the access accounts is held in a segregated client money account. This is good as it provides lenders with some protection. In fact uninvested cash has to be held this way.
AC also say that p2p platforms cannot pay interest on deposits on the platform. They are not authorised or regulated for that. Some platforms have paid interest on deposits, e.g. if deposits are held in a segregated client money account at RBS and RBS pays interest on this account.
It is the borrowers who pay the interest to lenders (sometimes topped up by the PF).
My understanding has been lenders are actually receiving more interest in the invested capital (say 9k) than 3.75% so that the net interest in the total 10k looks like 3.75%.
Personally I don't have a problem with this, I think it is quite clever of AC.
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iRobot
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Post by iRobot on Aug 16, 2020 11:10:52 GMT
Actually, @mousey 's first question may be the most pertinent - and I wouldn't be surprised if the answer was 'No'. The letter is signed off by: "Megan Butler Executive Director of Supervision - Investment, Wholesale & Specialists Division" but everything I'm reading on the FCA's site suggests P2P falls under the Retail part of "Retail and Authorisations" division. Could well be wrong; and even if correct, doesn't mean there won't be a similar letter heading out to the CEO's of P2P platforms at some point. If not, well ... not a completely pointless thought exercise I s'pose  |
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