james
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Post by james on Oct 11, 2015 9:27:51 GMT
in my case, I always want high quality compliance inside the firm because I'm FCA SIF-coded and the liability for violations sits with me personally. Does FCA full permission status for P2P companies have similar implications for their directors? I don't see a practical way for a firm to avoid having at least one Senior Manager who can handle approving Certified Persons on behalf of the firm. And such a Senior Manager would be responsible for their actions. It would be a really bad idea for anyone with decision-making authority in relation to investments or money handling to do something like not paying their commuting train fare. Making provably false public statements about the investments the firm is selling would also appear to be unwise for anyone not wanting to change job.* * For example, the Chairman of the Board of a P2P firm that is a member of the P2PFA has previously said in a previous role during live events that no lender using the platform has ever lost money, a statement that could only be true if accompanied by the caveat "if they followed our diversification recommendations", which wasn't given. Which was promptly noticed by lenders.
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Post by westonkevRS on Oct 11, 2015 18:51:21 GMT
in my case, I always want high quality compliance inside the firm because I'm FCA SIF-coded and the liability for violations sits with me personally. Does FCA full permission status for P2P companies have similar implications for their directors? I don't see a practical way for a firm to avoid having at least one Senior Manager who can handle approving Certified Persons on behalf of the firm. And such a Senior Manager would be responsible for their actions. It would be a really bad idea for anyone with decision-making authority in relation to investments or money handling to do something like not paying their commuting train fare. Making provably false public statements about the investments the firm is selling would also appear to be unwise for anyone not wanting to change job.* * For example, the Chairman of the Board of a P2P firm that is a member of the P2PFA has previously said in a previous role during live events that no lender using the platform has ever lost money, a statement that could only be true if accompanied by the caveat "if they followed our diversification recommendations", which wasn't given. Which was promptly noticed by lenders. ** This clearly wasn't RateSetter, because no lender has ever lost a penny whether they followed our advice or not! On a side note, I did used to be the CP14 FSA approved person for Goldfish Bank back in the day ( register.fca.org.uk/ShPo_IndividualDetailsPage?id=003b000000LUrziAAD ), but it won't be me for RateSetter. We got a fully staffed Compliance function and that'll be composed of the approved persons (and others) Kevin.
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bigfoot12
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Post by bigfoot12 on Oct 12, 2015 8:44:14 GMT
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ben
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Post by ben on Oct 12, 2015 9:18:13 GMT
Be interesting to see what the figures actual figures are, they do seem to like lend invest at the independent
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arbster
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Post by arbster on Oct 12, 2015 9:21:28 GMT
Has anyone managed to find a list of the ones that have withdrawn?
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james
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Post by james on Oct 12, 2015 9:34:29 GMT
I did used to be the CP14 FSA approved person for Goldfish Bank back in the day ... but it won't be me for RateSetter. We got a fully staffed Compliance function and that'll be composed of the approved persons (and others) I forsee lots of attention to the client money rules in light of the TrustBuddy events. Not just them, of course. I expect you're happy not to have such registration these days? This does still leave one significant problem for investors, though. A lack of auditing done by anyone with fiduciary responsibility to lenders, for P2P platforms in general, rather than any specific platform.
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Post by emoney on Oct 12, 2015 16:03:28 GMT
This is a really interesting thread, I can say that a six figure cash sum per annum is a realistic cost both now and going forward for credible P2P platforms. The compliance work during the last couple of years and for the forseeable future is substantial and relative to scale. The business models of P2P platforms are correctly receiving in-depth regulatory scrutiny, a really good guide to who may well be here in Q2 2016 would be to check out the shareholders and directors of the platforms, and have they raised fresh capital during the last twelve months (We have completed a further 2 equity fund raises since crowdcube April 2014 - confidential details I'm afraid). Another would be the regulatory competency of the board. We have a team of highly competent board members and investors at eMoneyUnion and we are all committed to 2016 and beyond. I personally feel that when looking at the numbers of P2P platforms operating in 2016, you should ask who is actually completing true peer to peer 36H loans now and which platforms are deemed consumer and business. When you do this I hazzard a guess at 5 consumer loan and maybe 15 business loan platforms. Here is a link to our team if anyone is interested.  www.emoneyunion.com/meet-team/ |
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james
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Post by james on Oct 12, 2015 19:20:58 GMT
have they raised fresh capital during the last twelve months (We have completed a further 2 equity fund raises since crowdcube April 2014 - confidential details I'm afraid). That is actually creating a bit of a trust problem. For a well known Estonian platform I'm paying some attention to both the funds raised and the know spending rate with the intention of removing all of my money if I think that it's getting close to running out before more funding is announced. Not claimed rates but public records like announcements of funding and company accounts. I would be more interested in this if a platform: 1. is growing rapidly 2. has failed one or more times with attempts at growth, while expanding overheads like employee costs to deal with the anticipated growth It is hard to know how to deal with this but regular six month statements by auditors that the platform has operating funds for at least the next x months would be useful.
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bababill
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Post by bababill on Oct 15, 2015 22:52:25 GMT
With regard to the P2PFA, I have to say I'm not a fan. They seem as slippery as most trade bodies typically are. Ms Farnish seemed totally unwilling to answer my question on how LendInvest was a member when they don't actually seem to have a deal flow structure than involves lenders facing borrowers! .. Exactly my sentiments on LendInvest. Glad to see somebody agrees with me. With Lendinvest you are buying the 'right to receive interest'; that is LendInvests exact words. It is not a P2P. I cannot believe they can try and claim P2P status and continually mis-sell to consumers. I thought they were P2P and the loans were properly asset backed but that is not the case at all. Now I am suffering with funds locked in for another 11 or so months with undo risk. Phrase Caveat Emptor does not apply in the case as the goods were not sold as is or perhaps they were.... From their website can anyone really explain what this means......When an investor invests in a loan (by way of the interest rate receivable contract), LendInvest holds the security on trust for the investor, in proportion to their investment.
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pikestaff
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Post by pikestaff on Oct 16, 2015 7:55:52 GMT
...From their website can anyone really explain what this means......When an investor invests in a loan (by way of the interest rate receivable contract), LendInvest holds the security on trust for the investor, in proportion to their investment. Not on LendInvest. but they go on to say:
"This trust arrangement is extremely important because it ensures that in the event that LendInvest comes under financial difficulty, and in a worst case scenario becomes insolvent, all of the loan security is held on trust for investors. That is, the security held for your investment, is entirely protected."I'm not a lawyer but a retired accountant. However, I used to have some occasional involvement with securitisations and sub-participations, which this is a form of. The trust arrangement should work, provided all the legals are done properly. The effect should be that the security "belongs" (in equity) to the investors. However, it may make things slightly more difficult in an insolvency than it would be if the loans were legally owned either by the lenders themselves or by a bankrupcty-remote SPV*. Specifically, although a receiver or administrator should not be able to get their hands on the loans, it may (I suspect) be harder to set up the "life after death of the platform" which the FCA requires for an orderly run-down. And in any event, using a bankrupcty-remote SPV is useful belt-and-braces. LendInvest proclaim the benefits of being able to pre-fund the loans and being the lender of record. I don't disagree. But you could still have these benefits if the loans were made by a bankruptcy-remote SPV subsidiary of LendInvest, which would continue to exist as the collection vehicle in the event that LendInvest itself went bust. *Jargonbuster: SPV = Special [or Single] Purpose Vehicle - a company, trust or partnership set up for a specific purpose. Bankruptcy remote = Designed to survive, undamaged, the insolvency of the parent or sponsoring entity, with no possibility whatsoever that the assets can be used for the benefit of the general creditors of the parent or sponsor.
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Post by easteregg on Oct 16, 2015 12:05:46 GMT
In Q2 2016 I would estimate that there would still be around 75 or so companies with permission. Once a company has achieved permission, but struggling financially, it could actually be bought out by another company seeking the necessary permission.
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james
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Post by james on Oct 16, 2015 12:20:42 GMT
As PikeStaff implied, there's nothing at all wrong with special purpose vehicle structuring. It's a useful way to protect lenders by keeping investor money and platform money separate. It can also be used to add more protection in a range of useful ways, like having money paid into the SPV to cover maintenance and insurance costs.
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bababill
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Post by bababill on Oct 17, 2015 3:54:56 GMT
Thanks Pikestaff for your response.
I agree the need/benefit to pre-fund a loan. As you say Lendinvests system should work but leaves an element of doubt.
Why don't they use Proplends method where they operate a genuine P2P model where the borrower and lenders have direct loan contracts between each other.
Proplend auctions a loan and if it does not fill their backer GLIF then buys the remaining part of the loan.
Then GLIF sells the loan (at par) on the secondary market. If one buys a loan on the secondary market then on the loan contract at the bottom the following is added: Loan assigned to 'new buyer' on xxxx date.
This matters because I recently questioned the further extension of a loan and they told me in no uncertain terms I have no say in decision making.
The exact words were as follows:
"As the primary lender and also the servicer of the loan we remain in full control with regards to decisions on the borrower and the underlying loan. As the investor, you are investing in the receivable of this loan which is a portion of the interest'
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james
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Post by james on Oct 17, 2015 7:15:21 GMT
This matters because I recently questioned the further extension of a loan and they told me in no uncertain terms I have no say in decision making. The exact words were as follows: "As the primary lender and also the servicer of the loan we remain in full control with regards to decisions on the borrower and the underlying loan. As the investor, you are investing in the receivable of this loan which is a portion of the interest' Did they also insist that your money remain invested in the loan for the longer term? And was it also not due to an arrangement to deal with some problem with the loan? What was their specific justification for a claim that they had the right to compel you to invest your money for a longer period than the initial term? Where and how in the terms and descriptions of how they work do they explain that you are granting them the right to decide in non-impairment cases how long your money will be invested for? It's OK for you not to have a right to decide on the loan but it may not be right for them to compel your continued participation and any contract term that they rely on for this has to be fair to you. It would be sensible in non-impairment cases for them to accept a notice by a lender that they do not want to have the term of their lending extended. An entirely proper impairment case with compulsion for you to keep your money invested could be something as straightforward as a property developer needing more time to get a property completed and sold to enable repayment. While one where a borrower just wanted to renew a loan for another term instead of making repayment that they could afford would be pretty clearly improper unless you were given the option to decline to participate. I agree the need/benefit to pre-fund a loan. As you say Lendinvests system should work but leaves an element of doubt. Why don't they use Proplends method where they operate a genuine P2P model where the borrower and lenders have direct loan contracts between each other. Because pre-funding allows them to provide the money to a borrower on a very short timescale, with no uncertainty for the borrower about whether a loan will be funded. Then GLIF sells the loan (at par) on the secondary market. If one buys a loan on the secondary market then on the loan contract at the bottom the following is added: Loan assigned to 'new buyer' on xxxx date. It doesn't appear that the loan is genuinely being assigned. Rather it appears that a right to a portion of the interest and security is being assigned. Unless 100% of the value of the loan and its interest is being assigned.
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pikestaff
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Post by pikestaff on Oct 17, 2015 7:21:57 GMT
Thanks Pikestaff for your response. I agree the need/benefit to pre-fund a loan. As you say Lendinvests system should work but leaves an element of doubt. Why don't they use Proplends method where they operate a genuine P2P model where the borrower and lenders have direct loan contracts between each other. Proplend auctions a loan and if it does not fill their backer GLIF then buys the remaining part of the loan. Then GLIF sells the loan (at par) on the secondary market. If one buys a loan on the secondary market then on the loan contract at the bottom the following is added: Loan assigned to 'new buyer' on xxxx date. This matters because I recently questioned the further extension of a loan and they told me in no uncertain terms I have no say in decision making. The exact words were as follows: "As the primary lender and also the servicer of the loan we remain in full control with regards to decisions on the borrower and the underlying loan. As the investor, you are investing in the receivable of this loan which is a portion of the interest' I assume "they" in your penultimate para refers to LendInvest? I think one of the reasons why LendInvest want to be the lender of record is that they want full control. Personally, I prefer that to cumbersome lender votes. They also mention prefunding. AFAICS Proplends' method does not prefund the loan. It gets funded only at the end of the auction. But I'm not on that site either, so I'm only going from your description. Another benefit for LendInvest/Montello may be (here I'm speculating) that it gives them maximum flexibility as to which loans they fund via p2p and which they fund from other sources. Looking at the biographies on LendInvest's website, I see that the co-founder and CEO used to be a securitisation lawyer at Clifford Chance, so I'm not at all surprised that they have gone for a securitisation/trust structure. It's what he knows. I have no problem with this. I'd just prefer it if the trust was in a bankruptcy-remote SPV subsidiary. It shouldn't be strictly necessary, but it makes it easier to get happy as an outsider, without access to the docs. I've spent more time on LendInvest's website writing these two posts than I ever have before. I'm quite impressed by the team and their success to date. If I was looking to increase my exposure to property (which I'm not), they would be on my list. Edit: Re james's points on fairness, it seems clear to me that you have a participation in a specific loan, managed by the servicer who has full discretion. Anything that the servicer reasonably judges to be in the interest of maximising recovery on that loan, for the benefit of lenders, is OK and you must expect to be bound in to an extension if it is for this purpose (eg a property development or bridge over-running). It should also be noted that there is an obligation to treat borrowers fairly. The servicer, and consequently the lenders, is bound by that. But an extension for no good reason would be a new loan and should be funded anew and not by the original lenders.
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