james
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Post by james on Oct 25, 2016 20:32:10 GMT
When I read things like " “I think the FCA’s biggest unmanageable concern is that the firms are not peer-to-peer lenders, but closer to a bank or a fund manager”" the first platforms that come to my mind are Zopa and RateSetter because they are operating as "you hand over the money, we make all of the decisions and won't even tell you where your money was invested". Much like a traditional bond or CDO* fund manager, but with less in the way of disclosure requirements. More recently, Octopus Choice has joined them and the regulatory regime arbitrage issue is something that I think might also be considered in that case given their other business. Added later... I see that N icola Horl ick just made a bid for Money & Co to be included in the fund manager not P2P camp: " if someone is buying the ISA, as they’re in effect buying into us managing the money for them and that’s where being a fund manager as well as an originator of loans comes into play and makes a huge difference" *Collateralised Debt Obligations, bundling up a package of loans that are then sold on, though without the fine risk gradations now used in CDO products. In this case to the P2P lenders, building the package over time as borrowers come in. |
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ablender
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Post by ablender on Oct 25, 2016 21:24:24 GMT
Has anyone looked at the new p2p platforms which got full authorisation? Do their models reflect or follow along any of the older platforms?
This can be a good indicator of possible outcomes.
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james
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Post by james on Oct 26, 2016 10:13:47 GMT
I have heard mutterings about some of the different business models, where the platform fills the loan first and then sells the loan parts, rather than the lender directly funding the borrower, may not be P2P as far as the FCA is concerned, however please don't take that as fact!
From a 21 October 2016 blog entry by Relendex, Relendex moves to Direct Lending Model that initially gives that impression: " On our path to full authorisation by the Financial Conduct Authority (FCA), we are making some changes to our lending model. ... So what are these new changes?
The old model:
* Each lender contracts (via the Exchange) with Relendex Lending Limited (RLL).
* RLL then lends on the same amount to an ultimate borrower under terms mirroring individual lender contracts.
* Relendex Security Trustees Limited (Security Trustees) takes security over the borrower’s asset, held in trust for the benefit of the lender group.
Our new model:
* Lenders bid on the live auction on the Relendex platform exactly as before.
* Relendex Lending Limited (RLL) issues a Loan Facility Agreement (LFA) to a borrower.
* When the auction fills ups, the loan is then novated (transferred) to individual lenders for their particular loan parts. In accordance with the FCA’s requirement and as a result of this process, lenders will be lending directly to the borrower for the amount they bid.
* The role of the Security Trustees acting for the benefit of the lender group remains unchanged." But the FAQ relating to novation suggests that the platform has at least the initial lending contract: " Q. What is a Lender Power of Attorney?
A. This limited Power of Attorney (provided once by the Lender to cover multiple future transactions) gives Relendex Limited, the Operator of the Relendex Platform, the authority to novate the Loan Facility Agreement (LFA) in favour of each of the individual lenders in order to creat a direct lending contractual relationship between the Borrower and each of them.
Q. What does Novation mean?
A. It means replacing a party to an agreement with another party, with the consent of all parties. In this case, in respect of the Loan Facility Agreement, replacing Relendex Lending Limited (acting as Facility Provider) with each successful bidder or purchaser of a Loan Part in a particular loan. This creates the direct contractual relationship between Borrower and individual lenders.
Q. Why is Novation necessary?
A. The Financial Conduct Authority requires Peer to Peer lenders to ensure that individual lenders have a direct contractual lending relationship with a Borrower. Since the Loan Facility Agreement (LFA) has to be negotiated and the Borrower committed prior to the loan auction (and the coming together of a group of lenders), the Facility Provider (Relendex Lending Limited) is the contracting party in the first instance with the Borrower. Once the loan auction is filled, the Facility Provider steps back and individual lenders (by novation) enter into a direct contractual relationship with the Borrower."
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Post by vanessaiman on Oct 26, 2016 13:40:14 GMT
When I read things like " “I think the FCA’s biggest unmanageable concern is that the firms are not peer-to-peer lenders, but closer to a bank or a fund manager”" the first platforms that come to my mind are Zopa and RateSetter because they are operating as "you hand over the money, we make all of the decisions and won't even tell you where your money was invested". Much like a traditional bond or CDO* fund manager, but with less in the way of disclosure requirements. More recently, Octopus Choice has joined them and the regulatory regime arbitrage issue is something that I think might also be considered in that case given their other business. Added later... I see that N icola Horl ick just made a bid for Money & Co to be included in the fund manager not P2P camp: " if someone is buying the ISA, as they’re in effect buying into us managing the money for them and that’s where being a fund manager as well as an originator of loans comes into play and makes a huge difference" *Collateralised Debt Obligations, bundling up a package of loans that are then sold on, though without the fine risk gradations now used in CDO products. In this case to the P2P lenders, building the package over time as borrowers come in. Hi james, Vanessa from Octopus Choice here. I saw your post and thought I’d get in touch! While it’s true that investors can’t pick and choose the individual loans in which their money is invested, we do try to be very transparent about the nature of the underlying investments. Currently investors are provided with a map of all the loans in their portfolio, along with how much money is invested in each, and the individual interest rate that each one earns. We’re also about to publish full details of all loans that have been funded through Octopus Choice – not just ones that are currently open for investment, but also those that have been fully funded or redeemed. That info will include loan size, term, LTV and location. We’ll be refining the information we share with our investors all the time – but we think the transparency of this sort of investment sets it apart from more opaque funds where it’s not always clear what’s ‘under the bonnet’. Best, Vanessa
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ablender
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Post by ablender on Oct 26, 2016 13:45:56 GMT
When I read things like " “I think the FCA’s biggest unmanageable concern is that the firms are not peer-to-peer lenders, but closer to a bank or a fund manager”" the first platforms that come to my mind are Zopa and RateSetter because they are operating as "you hand over the money, we make all of the decisions and won't even tell you where your money was invested". Much like a traditional bond or CDO* fund manager, but with less in the way of disclosure requirements. More recently, Octopus Choice has joined them and the regulatory regime arbitrage issue is something that I think might also be considered in that case given their other business. Added later... I see that N icola Horl ick just made a bid for Money & Co to be included in the fund manager not P2P camp: " if someone is buying the ISA, as they’re in effect buying into us managing the money for them and that’s where being a fund manager as well as an originator of loans comes into play and makes a huge difference" *Collateralised Debt Obligations, bundling up a package of loans that are then sold on, though without the fine risk gradations now used in CDO products. In this case to the P2P lenders, building the package over time as borrowers come in. Hi james , Vanessa from Octopus Choice here. I saw your post and thought I’d get in touch! While it’s true that investors can’t pick and choose the individual loans in which their money is invested, we do try to be very transparent about the nature of the underlying investments. Currently investors are provided with a map of all the loans in their portfolio, along with how much money is invested in each, and the individual interest rate that each one earns. We’re also about to publish full details of all loans that have been funded through Octopus Choice – not just ones that are currently open for investment, but also those that have been fully funded or redeemed. That info will include loan size, term, LTV and location. We’ll be refining the information we share with our investors all the time – but we think the transparency of this sort of investment sets it apart from more opaque funds where it’s not always clear what’s ‘under the bonnet’. Best, Vanessa Hi vanessaiman, If you are free to express an opinion/information, are you saying that your model works for FCA or are you still waiting? I ask this because as a lender (and I think there are many others ) I am concerned about which platforms will make it through and which not. Also what will happen to the loans and money invested through platforms that do not get fully authorised at the end of the process.
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james
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Post by james on Oct 26, 2016 16:46:39 GMT
While it’s true that investors can’t pick and choose the individual loans in which their money is invested, we do try to be very transparent about the nature of the underlying investments. Currently investors are provided with a map of all the loans in their portfolio, along with how much money is invested in each, and the individual interest rate that each one earns. We’re also about to publish full details of all loans that have been funded through Octopus Choice – not just ones that are currently open for investment, but also those that have been fully funded or redeemed. That info will include loan size, term, LTV and location. We’ll be refining the information we share with our investors all the time – but we think the transparency of this sort of investment sets it apart from more opaque funds where it’s not always clear what’s ‘under the bonnet’. Thanks Vanessa. Not sure I'd agree re funds given the mandatory disclosure requirements that apply to those for periodic snapshots. But as soon as you publish the underlying investments yes, I'd say Octopus Choice will be more transparent. Still, that wasn't really the focus of my post which was more about whether the FCA might regard Zopa, RateSetter and/or Octpus choice as really being something that should be regulated as funds, not whatever view the FCA has of what P2P should be, on the basis that they are more like funds where the investors just hand over the money and the manager does the rest. Of course I don't know where the FCA will choose to draw its lines so it was public wondering and discussion about what might happen and my thoughts on those that look most like traditional funds to me, rather than any knowledge of what the FCA might ultimately decide. It'd certainly be "interesting" if the FCA was to decide that Zopa isn't P2P! Will be interesting to see what they do decide.
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ablender
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Post by ablender on Oct 26, 2016 17:04:20 GMT
james, the "funds" that you are mentioning, are they similar to AC's products?
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james
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Post by james on Oct 26, 2016 17:07:43 GMT
james , the "funds" that you are mentioning, are they similar to AC's products? I don't know enough about those to have an opinion. I'm thinking of typical OEICs that are used for equities and bonds.
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ablender
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Post by ablender on Oct 26, 2016 17:10:39 GMT
james , the "funds" that you are mentioning, are they similar to AC's products? I don't know enough about those to have an opinion. I'm thinking of typical OEICs that are used for equities and bonds. Is there anyone who knows both Zopa / Ratesetter and AC who can express an opinion?
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dandy
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Post by dandy on Oct 26, 2016 18:31:27 GMT
Lending works recently got approval and their model is almost identical to RS as far as I can see. With LW you invest your funds, select 3/5 year and let them get on with it. If their provision fund is exhausted all lenders are pooled - a la resolution event at RS.
So if LW got fully authorised then the fire and forget/hands off model is clearly acceptable in itself
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ablender
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Post by ablender on Oct 26, 2016 19:26:29 GMT
Lending works recently got approval and their model is almost identical to RS as far as I can see. With LW you invest your funds, select 3/5 year and let them get on with it. If their provision fund is exhausted all lenders are pooled - a la resolution event at RS. So if LW got fully authorised then the fire and forget/hands off model is clearly acceptable in itself On FCA website, Lending works does not have P2P specified as one of its permissions. In the interim permissions register they had P2P specifically mentioned, which is now inactive as are the other interim permissions. I suppose this is because they now have full authorisation. Can someone else double check this please?
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jonah
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Post by jonah on Oct 26, 2016 19:31:01 GMT
I don't know enough about those to have an opinion. I'm thinking of typical OEICs that are used for equities and bonds. Is there anyone who knows both Zopa / Ratesetter and AC who can express an opinion? AC GBBA or Geia accounts have a lot in common with an OEIC. Both have a manager determined criteria, where they work out what goes in and to what limits. However there are differences. GBBA doesn't have pooled ownership of the loans in it, both you and I could have a similar size account but totally different loans. there is also no capital appreciation for GBBA. Personally, and this is pure speculation, the AC QAA account may face more regulatory challenges than GBBA as that's what the reference to banks immediately brought to mind. All of that said, AC is my largest platform and im in all the accounts mentioned in this post, so moving that lot to an ISA would be nice.
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dandy
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Post by dandy on Oct 26, 2016 19:44:54 GMT
Lending works recently got approval and their model is almost identical to RS as far as I can see. With LW you invest your funds, select 3/5 year and let them get on with it. If their provision fund is exhausted all lenders are pooled - a la resolution event at RS. So if LW got fully authorised then the fire and forget/hands off model is clearly acceptable in itself On FCA website, Lending works does not have P2P specified as one of its permissions. In the interim permissions register they had P2P specifically mentioned, which is now inactive as are the other interim permissions. I suppose this is because they now have full authorisation. Can someone else double check this please? The regulatory stuff is way above my pay grade - I thought they had p2p permissions but I could be wrong, apologies if so
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Post by Matthew on Oct 26, 2016 20:30:21 GMT
Lending works recently got approval and their model is almost identical to RS as far as I can see. With LW you invest your funds, select 3/5 year and let them get on with it. If their provision fund is exhausted all lenders are pooled - a la resolution event at RS. So if LW got fully authorised then the fire and forget/hands off model is clearly acceptable in itself On FCA website, Lending works does not have P2P specified as one of its permissions. In the interim permissions register they had P2P specifically mentioned, which is now inactive as are the other interim permissions. I suppose this is because they now have full authorisation. Can someone else double check this please? The regulated activity of P2P is defined by the FSMA as "Operating an electronic system in relation to lending" (article 36H). You can see this listed in the "Permission" section here: register.fca.org.uk/ShPo_FirmDetailsPage?id=001b000001m2IJAAA2. Hope this helps.
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ilmoro
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Post by ilmoro on Oct 26, 2016 20:33:47 GMT
ablender Peer to peer was only mentioned for those platforms who got IP through the old system prior to early 2014, anyone after doesnt mention P2P at all The correct permission for a fully authorised platform is 'Operating an electronic system in relation to lending' which LW have. Key thing is loans are 36H compliant Edit crossed with platform rep
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