p2pfan
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Post by p2pfan on Jun 19, 2021 20:35:59 GMT
There's an interesting and rather worrying article in the CapitalStackers blog here about FCA proposals that will result in a ban of promotion of property development loans on P2P platforms. Considering the majority of loans on many P2P platforms are for property development projects, I fear it would be the death of many P2P companies. The article encourages us to respond to the consultation on the FCA website and I would encourage us all to do so as this FCA initiative could mean the closure of many P2P platforms we're all invested into. What do you think about these FCA proposals? Are they as concerning as they seem? |
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iRobot
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Post by iRobot on Jun 19, 2021 21:13:45 GMT
There's an interesting and rather worrying article in the CapitalStackers blog here about FCA proposals that will result in a ban of promotion of property development loans on P2P platforms. Considering the majority of loans on many P2P platforms are for property development projects, I fear it would be the death of many P2P companies. The article encourages us to respond to the consultation on the FCA website and I would encourage us all to do so as this FCA initiative could mean the closure of many P2P platforms we're all invested into. What do you think about these FCA proposals? Are they as concerning as they seem? I'm not reading the proposals this way and certainly not as being the death-knell to P2P platforms. From the ' Response' link: If - and it's a pretty big 'if' - it achieves what it sets out to do, then it's a good thing, IMO. Scare the b'jesus out of retail investors and make darn certain that they are aware they will lose money at some point and to therefore make proper, risk-adjusted investment decisions. Better still - again, IMO - keep 'retail' investors out of the individual loans markets and leave it to the Sophisticated / HNW investors. FWIW, my view is that platforms might be getting their boxers in a bunch if 'retail' investors are prevented from investing in loans. That should just leave the Sophisticated / HNW investors and those cohorts should be able to detect a bargepole loan when they see one. With a bit of luck that will force platforms to only bring good quality opportunities to the market and stop relying on 'dumb retail money' blinded by high interest rates and a fear of missing out. Edit: "good quality opportunities" is of course a relative term; in P2P-land these are still relatively low quality ...
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cwah
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Post by cwah on Jun 19, 2021 22:32:57 GMT
The problem isn't the developer or quality of loan. The problem is the current structure of P2P platform that put the administrators, creditors, borrowers and directors above the investors should a problem arise.
It's like making donation at this stage and P2P is uninvestable at this stage.
P2P aren't investing in loans but rather are donating their money to platform and paying for their failure.
That is what they should focus on. They are sorting out the wrong problem
I invested in plenty of quality loans but it makes no difference if the platform fail. The recovery takes YEARS and pay every single creditors before us leaving me nothing
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 19, 2021 23:00:09 GMT
Basically AIUI they are suggesting classifying development loans as the equivalent of speculative illiquid securities. SIS can only be promoted to sophisticated (self or otherwise) or HMW investors.
This will not prevent P2P platforms from promoting them to lenders who fall into those categories.
IIRC to qualify as self-certified you need to have invested in a P2P loan (or one unlisted company) which likely covers all but new lenders so they will just have to separate development loans from other loans so that only permitted investors can see them.
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Post by capitalstackers on Jun 22, 2021 16:55:57 GMT
The purpose of our blog was to highlight the possibility of:
- P2P property development lending being categorised as a Speculative Illiquid Security (“SIS”) and thereby immediately removing Restricted investors from the field;
- An extension of the current promotion rules to prohibit marketing to Sophisticated and HNW investors (both of which, by the way, are “retail” investors);
- Further hurdles (over and above the existing Appropriateness Test) to be imposed on Sophisticated and HNW investors;
- All investors having to receive Independent Financial Advice. This would necessarily assume such advice were readily available, which it isn’t – we’ve yet to meet an IFA willing to advise on non-standard assets because their PI insurance only covers them advising on standard assets.
Depending on the feedback submitted through the consultation process, the FCA could impose none, some or all of the above – hence the need for investors to contribute and make their opinions known.
The SIS thinking is driven, we believe, by perceived similarities between P2P property development lending and mini bonds – in particular, the investment term (typically 5 years) and reliance on new investors creating the liquidity for existing investors to exit early. Whilst these similarities might apply in some way to pooled lending arrangements, they do not apply to direct lending where liquidity is generated by each loan redemption and such repayments are typically 18-24 months (or earlier through a secondary market). P2P lending is secured directly on the asset, whilst mini bonds are not. The whole process has been triggered by certain infamous mini bond providers and failed P2P platforms which have left in their wake a trail of investor destruction. What did they have in common? Poor management, poor culture and a lack of relevant property development finance experience. The P2P investor base has been polarised into those who have been harmed and those who have done well, with the former being understandably quite vocal. There is a real and present danger that good platforms with good management doing good things will become severed from their retail investor base (including Sophisticated and HNW). We think that’s a lose, lose situation worth fighting against. |
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keystone
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Post by keystone on Jun 22, 2021 23:15:38 GMT
The whole process has been triggered by certain infamous mini bond providers and failed P2P platforms which have left in their wake a trail of investor destruction. What did they have in common? Poor management, poor culture and a lack of relevant property development finance experience. The P2P investor base has been polarised into those who have been harmed and those who have done well, with the former being understandably quite vocal. There is a real and present danger that good platforms with good management doing good things will become severed from their retail investor base (including Sophisticated and HNW). We think that’s a lose, lose situation worth fighting against.The FCA authorising them is what they all had in common with absolutely no checks or supervision. The FCA was to busy protecting their own. P2P should never have been marketed to retail investors when in reality it was the wild west of investing. The FCA haven't cleaned it up now, they have just covered it up. No, it's' only a lose lose situation for all the scammers, crooks, thieves, platforms, valuers, administrators, liquidators, lawyers, directors of P2P platforms and the FCA, basically the  of the earth. The best thing would be for the FCA to admit its complete failure and wind the P2P sector down.
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cwah
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Post by cwah on Jun 22, 2021 23:55:38 GMT
The purpose of our blog was to highlight the possibility of:
- P2P property development lending being categorised as a Speculative Illiquid Security (“SIS”) and thereby immediately removing Restricted investors from the field;
- An extension of the current promotion rules to prohibit marketing to Sophisticated and HNW investors (both of which, by the way, are “retail” investors);
- Further hurdles (over and above the existing Appropriateness Test) to be imposed on Sophisticated and HNW investors;
- All investors having to receive Independent Financial Advice. This would necessarily assume such advice were readily available, which it isn’t – we’ve yet to meet an IFA willing to advise on non-standard assets because their PI insurance only covers them advising on standard assets.
Depending on the feedback submitted through the consultation process, the FCA could impose none, some or all of the above – hence the need for investors to contribute and make their opinions known.
The SIS thinking is driven, we believe, by perceived similarities between P2P property development lending and mini bonds – in particular, the investment term (typically 5 years) and reliance on new investors creating the liquidity for existing investors to exit early. Whilst these similarities might apply in some way to pooled lending arrangements, they do not apply to direct lending where liquidity is generated by each loan redemption and such repayments are typically 18-24 months (or earlier through a secondary market). P2P lending is secured directly on the asset, whilst mini bonds are not. The whole process has been triggered by certain infamous mini bond providers and failed P2P platforms which have left in their wake a trail of investor destruction. What did they have in common? Poor management, poor culture and a lack of relevant property development finance experience. The P2P investor base has been polarised into those who have been harmed and those who have done well, with the former being understandably quite vocal. There is a real and present danger that good platforms with good management doing good things will become severed from their retail investor base (including Sophisticated and HNW). We think that’s a lose, lose situation worth fighting against. Nicely put together. I didn't know capital stacker before and by doing a quick check it looks about as old as Lendy. I wish I invested in your platform at that time instead of Lendy or FundingSecure.... but here we go. I don't think it's reasonable as you say to ban the entire sectore to retail. However it needs level playing field because at the moment the retail investors are picking the bills when a platform fails. That's why I completely exited P2P as I don't see a fair risk to reward where the most I could get is about 12% but I risk all my loans going to £0 (or close to after administrators, legal, creditor and platform fees) should the platform goes into administration
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nyneil
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Post by nyneil on Jun 23, 2021 11:45:41 GMT
IMO ALL p2p loans should be treated as SIS!
Liquidity by virtue of a secondary market? Sure, until the loan is suspended and you are stuck in it until a fireside sale returns peanuts .....
There was a PG for extra security? Not worth the paper it's written on!
The security was good, so should be ok? Great until a dodgy borrower maliciously sues the platform, causing them to go into administration, or any other reason the platform fails.
Etc, etc, etc. Think of Paul Simon's song: "50 ways to shaft a lender".
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of the earth. The best thing would be for the FCA to admit its complete failure and wind the P2P sector down.