bigfoot12
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Post by bigfoot12 on Jul 5, 2016 8:21:01 GMT
The problem with funding your TC account, is that it takes upto 2 working days for deposits to show up in your account. If TC & SS are to go down this route, then they need to deposit funds into members' accounts sooner, otherwise by the time your funds show up in your account, the loan you want to invest in, is already full, then you need to withdraw funds, causing pointless admin. The same email states that TC have already increased the frequency of processing such requests, and will soon have real time access.
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Post by chris on Jul 5, 2016 8:21:20 GMT
But what's the regulatory issue with INPL? Lenders are clearly not entering a contract or commitment with SS's INPL system - they are in effect reserving the money with 'cheque in the post'... If the money comes, fine, if the money doesn't come, the parts go back into the pot. In what way could this possibly worry a regulator? Jack P IIRC the Technical Director of a rival platform suggested a scenario in which an investor who had sent his money could lose out unfairly because of use of INPL by others. It's on this forum (not SS) somewhere but could take some finding. The issue with client money is that platforms are only allowed to use cleared funds. Even a debit card's notification that payment has been made is not good enough, you have to have actual cleared funds in the client money bank account before they can be credited to the lender on platform. The problem with SS's implementation as I understand it is that they allow funds to leave the platform that have not yet cleared from the other party. So if I were to buy loan parts on the aftermarket I do not have to have cash in the platform in order to do so. It becomes an automatic credit to the account, without any warning, for me to settle in the future. Yet those funds are immediately released to the seller who is then free to withdraw them from the platform. If I never transfer in funds to settle that purchase then funds have left the platform with no replacement, a categoric breach of the client money regulations. The same occurs with the drawdown of a loan where funds are released to the borrower that have not yet been credited by lenders. In those instances client money is leaving the client money account that shouldn't be. In effect it is someone else's money being used to fund the withdrawal. For example: If lender A has £1,000 cash in the client money account, lender B has a £100 loan part, and lender C has £0 invested. Were lender C to buy the loan part from lender B without first depositing funds and then lender B withdraws that £100 from the platform before lender C has made a deposit, it is in effect lender A's money that has been withdrawn. They have £1,000 cash according to the platform but there is only £900 in the client money account. That situation is a huge no no with the FCA. It's possible that SS have some clever work around that ultimately gets around all the other regulations, such as platform money and client money not being mixed in the same account and platforms not investing in their own loans, that the FCA will ultimately be happy with. It's also possible that they do not and will be told to change when inspected by the FCA and possibly even sanctioned. Until they either change their practice or the FCA inspect it we'll be left guessing.
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bigfoot12
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Post by bigfoot12 on Jul 5, 2016 8:26:44 GMT
The issue with client money is that platforms are only allowed to use cleared funds. Even a debit card's notification that payment has been made is not good enough, you have to have actual cleared funds in the client money bank account before they can be credited to the lender on platform. TC don't seem to be taking such a strong view as they will be allowing deposit by debit card. All of the share platforms I use allow me to deposit money by credit card and then invest it straight away. As I might buy shares in Barratt which then drop 30%+ that is money leaving the platform.
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Post by chris on Jul 5, 2016 8:35:59 GMT
The issue with client money is that platforms are only allowed to use cleared funds. Even a debit card's notification that payment has been made is not good enough, you have to have actual cleared funds in the client money bank account before they can be credited to the lender on platform. TC don't seem to be taking such a strong view as they will be allowing deposit by debit card. All of the share platforms I use allow me to deposit money by credit card and then invest it straight away. As I might buy shares in Barratt which then drop 30%+ that is money leaving the platform. Until those platforms are fully regulated that doesn't mean they're right; and even then the FCA can retrospectively say that they should never have allowed a debit card solution. As I understand it shares are classified differently as you have a different relationship with the trading platform than you do with a P2P lending platform and we are regulated differently with different permissions. There are complex workarounds where platforms can float the cash themselves but until we're regulated we're sticking with the strictest possible interpretation. We'll then look at what others are doing and see if there are areas we can be more liberal. Edit: I should add that * if* TC were told to change approach by the FCA then they would have been told what not to do not how to fix it so they could easily implement something else that the FCA would not be happy with.
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Post by jackpease on Jul 5, 2016 8:59:01 GMT
Thanks Chris, I get it.
Presumably this could all be resolved with wording, eg INPL could become RNPL - Reserve Now Pay Later - ie that it operates exactly as now - you reserve the loan part, become eligible for interest straight away - and when the money clears then the reservation automatically becomes a contract/permanent.
If buying a loan part with proceeds of a loan part - same applies - RNPL rather than INPL. All of this would make no difference to the buying process.
My guess is semantics can get round the apparent technical breach. I hope so - I don't want SS to morph into any vanilla regulator-small-print-compliant p2p clone, I like it as it is, which is much like Assetz was in early days, ie simple and per-loan risk in yer face :-)
Jack P
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Jul 5, 2016 11:10:41 GMT
INPL just encourages gaming and rewards FFF when there is insufficient supply to meet demand. Without it, priority in allocation would go to those with cash already on the platform and then to fastest transfer first (FTF). This seems to me to be fairer.
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nick
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Post by nick on Jul 5, 2016 13:36:00 GMT
IIRC the Technical Director of a rival platform suggested a scenario in which an investor who had sent his money could lose out unfairly because of use of INPL by others. It's on this forum (not SS) somewhere but could take some finding. The issue with client money is that platforms are only allowed to use cleared funds. Even a debit card's notification that payment has been made is not good enough, you have to have actual cleared funds in the client money bank account before they can be credited to the lender on platform. The problem with SS's implementation as I understand it is that they allow funds to leave the platform that have not yet cleared from the other party. So if I were to buy loan parts on the aftermarket I do not have to have cash in the platform in order to do so. It becomes an automatic credit to the account, without any warning, for me to settle in the future. Yet those funds are immediately released to the seller who is then free to withdraw them from the platform. If I never transfer in funds to settle that purchase then funds have left the platform with no replacement, a categoric breach of the client money regulations. The same occurs with the drawdown of a loan where funds are released to the borrower that have not yet been credited by lenders. In those instances client money is leaving the client money account that shouldn't be. In effect it is someone else's money being used to fund the withdrawal. For example: If lender A has £1,000 cash in the client money account, lender B has a £100 loan part, and lender C has £0 invested. Were lender C to buy the loan part from lender B without first depositing funds and then lender B withdraws that £100 from the platform before lender C has made a deposit, it is in effect lender A's money that has been withdrawn. They have £1,000 cash according to the platform but there is only £900 in the client money account. That situation is a huge no no with the FCA. It's possible that SS have some clever work around that ultimately gets around all the other regulations, such as platform money and client money not being mixed in the same account and platforms not investing in their own loans, that the FCA will ultimately be happy with. It's also possible that they do not and will be told to change when inspected by the FCA and possibly even sanctioned. Until they either change their practice or the FCA inspect it we'll be left guessing. This is why I've always been concerned by INPL, in effect the credit is being funded by everyone else via the client money account. One way stock brokers have addressed this issue in the past (as recent changes in client money/asset rules prohibits recording of unfunded transactions through client accounts) is for SS to fund the credit balance via transfers to the client account whilst individual accounts are in negative balance.
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Liz
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Post by Liz on Jul 5, 2016 13:41:52 GMT
The problem with funding your TC account, is that it takes upto 2 working days for deposits to show up in your account. If TC & SS are to go down this route, then they need to deposit funds into members' accounts sooner, otherwise by the time your funds show up in your account, the loan you want to invest in, is already full, then you need to withdraw funds, causing pointless admin. The same email states that TC have already increased the frequency of processing such requests, and will soon have real time access. Great news. I unsubscribed from their stupid newsletter(marketing letter), now I don't get the important e-mails, like this.
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Post by andrewholgate on Jul 5, 2016 14:39:51 GMT
I don't usually comment on other boards as I find it dangerous. In this case I want to add clarity.
The exact rule is, the platform cannot use money from person A to fund purchases by person B. If person B is not in cleared funds by the time they invest, they shouldn't be investing. The platform cannot use other funds in the client account (ie money from person A) to fund the purchases/investment of person B. If they do, it is a collective investment scheme and it is a breach of client money rules or FCA permissions unless you are an approved UCIS body. It is the same with your solicitor when you buy a house, they won't execute documentation until you have put them in cleared funds.
Anyone running client accounts simply cannot operate on a "promise" to pay. It has to be cleared funds by the person before they can invest. Debit cards would carry similar issues as there is a 4 day clearing cycle. Just because a bank issues a "approved" notice doesn't mean you will get the funds. A debit card is not an instantaneous cash transaction.
The reason why AC are so cautious is that we have worked in this environment for 20 years+ and know what happens when you breach the rules. The FCA don't take kindly to it. They will tell you to change there and then, and if you don't make changes they will enforce on you. I'm not concerned by how other platforms operate, only how we operate and at AC we do it under how we know the client money rules should be adhered to.
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Post by lb on Jul 5, 2016 14:53:36 GMT
I don't usually comment on other boards as I find it dangerous. In this case I want to add clarity. The exact rule is, the platform cannot use money from person A to fund purchases by person B. If person B is not in cleared funds by the time they invest, they shouldn't be investing. The platform cannot use other funds in the client account (ie money from person A) to fund the purchases/investment of person B. If they do, it is a collective investment scheme and it is a breach of client money rules or FCA permissions unless you are an approved UCIS body. It is the same with your solicitor when you buy a house, they won't execute documentation until you have put them in cleared funds. Anyone running client accounts simply cannot operate on a "promise" to pay. It has to be cleared funds by the person before they can invest. Debit cards would carry similar issues as there is a 4 day clearing cycle. Just because a bank issues a "approved" notice doesn't mean you will get the funds. A debit card is not an instantaneous cash transaction. The reason why AC are so cautious is that we have worked in this environment for 20 years+ and know what happens when you breach the rules. The FCA don't take kindly to it. They will tell you to change there and then, and if you don't make changes they will enforce on you. I'm not concerned by how other platforms operate, only how we operate and at AC we do it under how we know the client money rules should be adhered to. an electronic platform for lending cannot be a UCIS www.financialregulatory.com/treasury-exempts-peer-to-peer-lending-platforms-from-cis-definition
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fasty
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Post by fasty on Jul 5, 2016 16:33:38 GMT
This will presumably also affect another place (Fumbling Circus) where debit card payment allows immediate funding and purchase of loan parts. I had naively pondered this before, having noticed that I could purchase immediately, but the money didn't seem to exit my bank account for a day or so.
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Post by andrewholgate on Jul 5, 2016 16:58:49 GMT
I don't usually comment on other boards as I find it dangerous. In this case I want to add clarity. The exact rule is, the platform cannot use money from person A to fund purchases by person B. If person B is not in cleared funds by the time they invest, they shouldn't be investing. The platform cannot use other funds in the client account (ie money from person A) to fund the purchases/investment of person B. If they do, it is a collective investment scheme and it is a breach of client money rules or FCA permissions unless you are an approved UCIS body. It is the same with your solicitor when you buy a house, they won't execute documentation until you have put them in cleared funds. Anyone running client accounts simply cannot operate on a "promise" to pay. It has to be cleared funds by the person before they can invest. Debit cards would carry similar issues as there is a 4 day clearing cycle. Just because a bank issues a "approved" notice doesn't mean you will get the funds. A debit card is not an instantaneous cash transaction. The reason why AC are so cautious is that we have worked in this environment for 20 years+ and know what happens when you breach the rules. The FCA don't take kindly to it. They will tell you to change there and then, and if you don't make changes they will enforce on you. I'm not concerned by how other platforms operate, only how we operate and at AC we do it under how we know the client money rules should be adhered to. an electronic platform for lending cannot be a UCIS www.financialregulatory.com/treasury-exempts-peer-to-peer-lending-platforms-from-cis-definition Correct and my error to quote it for P2P. Still doesn't change what client money rules say. You cannot use one persons funds for another persons purposes. There has to be clear segregation of funds.
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archie
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Post by archie on Jul 5, 2016 17:15:55 GMT
This will presumably also affect another place (Fumbling Circus) where debit card payment allows immediate funding and purchase of loan parts. I had naively pondered this before, having noticed that I could purchase immediately, but the money didn't seem to exit my bank account for a day or so. Although the money doesn't appear to exit your bank, if you check your available balance it immediately drops by the amount spent. It just takes a couple of days for the debit card transaction details to appear on your statement..
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mosaic
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Post by mosaic on Jul 5, 2016 17:43:07 GMT
The problem with SS's implementation as I understand it is that they allow funds to leave the platform that have not yet cleared from the other party. So if I were to buy loan parts on the aftermarket I do not have to have cash in the platform in order to do so. It becomes an automatic credit to the account, without any warning, for me to settle in the future. Yet those funds are immediately released to the seller who is then free to withdraw them from the platform. If I never transfer in funds to settle that purchase then funds have left the platform with no replacement, a categoric breach of the client money regulations. The same occurs with the drawdown of a loan where funds are released to the borrower that have not yet been credited by lenders. In those instances client money is leaving the client money account that shouldn't be. In effect it is someone else's money being used to fund the withdrawal. For example: If lender A has £1,000 cash in the client money account, lender B has a £100 loan part, and lender C has £0 invested. Were lender C to buy the loan part from lender B without first depositing funds and then lender B withdraws that £100 from the platform before lender C has made a deposit, it is in effect lender A's money that has been withdrawn. They have £1,000 cash according to the platform but there is only £900 in the client money account. That situation is a huge no no with the FCA. It's possible that SS have some clever work around that ultimately gets around all the other regulations, such as platform money and client money not being mixed in the same account and platforms not investing in their own loans, that the FCA will ultimately be happy with. It's also possible that they do not and will be told to change when inspected by the FCA and possibly even sanctioned. Until they either change their practice or the FCA inspect it we'll be left guessing. I'm a bit confused. A has £1000 of value in the loan parts B has £100 of value C has £0 of value B sells his £100 to C who has not yet paid and B withdraws their £100 A has £1000 of value in loan parts B has £0 value C has £0 value but owes £100 There is still a loan part with no owner with value £100 in the 'Client Fund' which is available for purchase by C or someone else at a cost of £100. This is the same as it would be if a prefund were undertaken that left a loan part of £100 in 'Client Fund'. 'A' has not lost anything.
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Post by chris on Jul 5, 2016 17:48:12 GMT
The problem with SS's implementation as I understand it is that they allow funds to leave the platform that have not yet cleared from the other party. So if I were to buy loan parts on the aftermarket I do not have to have cash in the platform in order to do so. It becomes an automatic credit to the account, without any warning, for me to settle in the future. Yet those funds are immediately released to the seller who is then free to withdraw them from the platform. If I never transfer in funds to settle that purchase then funds have left the platform with no replacement, a categoric breach of the client money regulations. The same occurs with the drawdown of a loan where funds are released to the borrower that have not yet been credited by lenders. In those instances client money is leaving the client money account that shouldn't be. In effect it is someone else's money being used to fund the withdrawal. For example: If lender A has £1,000 cash in the client money account, lender B has a £100 loan part, and lender C has £0 invested. Were lender C to buy the loan part from lender B without first depositing funds and then lender B withdraws that £100 from the platform before lender C has made a deposit, it is in effect lender A's money that has been withdrawn. They have £1,000 cash according to the platform but there is only £900 in the client money account. That situation is a huge no no with the FCA. It's possible that SS have some clever work around that ultimately gets around all the other regulations, such as platform money and client money not being mixed in the same account and platforms not investing in their own loans, that the FCA will ultimately be happy with. It's also possible that they do not and will be told to change when inspected by the FCA and possibly even sanctioned. Until they either change their practice or the FCA inspect it we'll be left guessing. I'm a bit confused. A has £1000 of value in the loan parts B has £100 of value C has £0 of value B sells his £100 to C who has not yet paid and B withdraws their £100 A has £1000 of value in loan parts B has £0 value C has £0 value but owes £100 There is still a loan part with no owner with value £100 in the 'Client Fund' which is available for purchase by C or someone else at a cost of £100. This is the same as it would be if a prefund were undertaken that left a loan part of £100 in 'Client Fund'. 'A' has not lost anything. To begin with: A has £1,000 of cash in the client money account but no loan parts. B has £0 of cash in the client money account but £100 of loan parts. The cash component of the loan parts has already left the client money account to go to the borrower. C has £0 of cash and no loan parts. There is £1,000 of cash in the client money account. B sells his £100 to C who has not yet paid and B withdraws their £100. A has £1,000 of cash in the client money account according to the system. B has £0 of cash, due to their withdrawal, and no loan parts. C has £0 of cash and £100 of loan parts but hasn't yet paid for them. Or you can consider the £100 of loan parts unallocated if they are taken back by the platform. There is £900 of cash in the client money account as B has withdrawn £100. So there is a £100 shortfall in the client money account between what is in there as cash and the amount currently allocated to A in the system. Were everything frozen at this point in time lender A would be £100 out of pocket as they, in effect, funded B's cash withdrawal.
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