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Post by mrclondon on Sept 9, 2016 19:10:45 GMT
Bondora were never in the UK, so would never come under the FCA's remit anyway. Likewise Trustbuddy. They would have been regulated in their own countries - Estonia and Sweden - and were open to investors here under the EU passporting regs. But no, they ply for business in the UK and they make a big song and dance about how they ARE under the FCAErr no ... not since July 12th this year. This post from Bondora's representative on this thread explains: Too late. No longer a part of FCA From the FT article: Bondora previously had interim authorisation from the UK’s Financial Conduct Authority, but Tomberg says they withdrew their application for a full license after the Brexit vote in late June. The FCA register says the company’s interim permission lapsed on July 12, but Bondora’s website — presumably slow to update — still says the company is “authorised and regulated” by the FCA. Hello. Yes, after the Brexit vote we decided to withdraw our application. Currently we see that the regulatory setup for the UK market is too uncertain to do any specific decisions on moving our headquarter there (this was one of the requirements). The license itself is not required to have for allowing the investors from the UK to invest. If we would ever want to target the UK borrowers then the license is of course necessary. [ .... ] Thank you. Best wishes, Martha One of the issues I raised with the FCA was the status of platforms based in the EU (outside UK) but dependent on passporting arrangements to target UK lenders.
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adrianc
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Post by adrianc on Sept 9, 2016 20:05:34 GMT
...moving our headquarter there (this was one of the requirements). The license itself is not required to have for allowing the investors from the UK to invest. If we would ever want to target the UK borrowers then the license is of course necessary. So there's no need to have an FCA approval to target investors here, and one requirement for FCA approval is to have your primary base here - so not only would non-UK platforms not need to be FCA-approved, but they wouldn't actually be able to be. But they would need to be to target UK borrowers? That seems strange. Seems to say that platforms can only lend in their own country - and, obviously, we know that's not the situation, because several platforms already lend across multiple countries.
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Post by martin44 on Sept 9, 2016 20:38:25 GMT
...moving our headquarter there (this was one of the requirements). The license itself is not required to have for allowing the investors from the UK to invest. If we would ever want to target the UK borrowers then the license is of course necessary. So there's no need to have an FCA approval to target investors here, and one requirement for FCA approval is to have your primary base here - so not only would non-UK platforms not need to be FCA-approved, but they wouldn't actually be able to be. But they would need to be to target UK borrowers? That seems strange. Seems to say that platforms can only lend in their own country - and, obviously, we know that's not the situation, because several platforms already lend across multiple countries. The marthaskirta quote seems to me to be quite legitimate, as a consumer, you can lend money to whom ever you like, wherever you like, but (as a p2p platform) to lend that money to a uk consumer would require you to have UK FCA Approval. The UK FCA approval is in place to protect the UK consumer/borrower, and the lender, if a lender decides to lend to , lets say an Estonian platform, then i would assume that the platform is run under Estonian legislation. As marthaskirta said they "would" be able to target UK lenders if they were to move their headquarters here, but due to brexit concerns, they did not.
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Post by mrclondon on Sept 19, 2016 23:37:25 GMT
It just goes to show that we are not collectively wasting our time contributing to this forum ...
And my own response to the FCA was informed by much of what I read on the forum, both this thread and more widely. So a collective pat on the back to everyone for making the forum what it is.
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registerme
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Post by registerme on Sept 20, 2016 8:47:19 GMT
I think this is worth stickying again for a few days - it will increase the chances that people read it.
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pikestaff
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Post by pikestaff on Dec 9, 2016 8:25:51 GMT
The FCA has today published interim feedback on the consultation, indicating the areas where it thinks new rules are needed. Detailed proposals to follow Q1 2017. The press release is here: www.fca.org.uk/news/press-releases/fca-publishes-interim-feedback-following-call-input-post-implementation-reviewand the full document is here: www.fca.org.uk/publication/feedback/fs16-13.pdfThe text of the press announcement is below: "The Financial Conduct Authority (FCA) has given an update on the post-implementation review of the loan-based and investment-based crowdfunding market. Our earlier call for input raised a number of issues for discussion; the feedback statement provides a first response to the feedback received and sets out next steps.
Based on a review of the feedback received, issues seen during the supervision of crowdfunding platforms currently trading and consideration of applications from firms seeking full authorisation, the FCA believes it is appropriate to modify a number of rules for the market.
Initial findings
Loan-based and investment-based crowdfunding
For both loan-based and investment-based crowdfunding platforms we have found that, for example:
- it is difficult for investors to compare platforms with each other or to compare crowdfunding with other asset classes due to complex and often unclear product offerings
- it is difficult for investors to assess the risks and returns of investing on a platform
- financial promotions do not always meet our requirement to be ‘clear, fair and not misleading’ and
- the complex structures of some firms introduce operational risks and/or conflicts of interest that are not being managed sufficiently
Loan-based crowdfunding
In the loan-based crowdfunding market in particular we are concerned that, for example:
- certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors
- the plans some firms have for wind-down in the event of their failure are inadequate to successfully run-off loan books to maturity
- we have challenged some firms to improve their client money handling standards
Proposals for new rules to be considered in Q1 2017
We plan to consult on additional rules in a number of areas. These include more prescriptive requirements on the content and timing of disclosures by both loan-based and investment-based crowdfunding platforms.
For loan-based crowdfunding we also intend to consult on:
- strengthening rules on wind-down plans
- additional requirements or restrictions on cross-platform investment
- extending mortgage-lending standards to loan-based platforms
The FCA’s current rules on loan-based and investment-based crowdfunding platforms came into force in April 2014. They aimed to create a proportionate regulatory framework that provided adequate investor protection whilst allowing for innovation and growth in the market.
The call for input in July 2016 launched a post-implementation review of these rules. The paper summarised market developments since 2014 and some of the FCA’s emerging concerns.
Andrew Bailey, Chief Executive of the FCA, said:
“Our focus is ensuring that investor protections are appropriate for the risks in the crowdfunding sector while continuing to promote effective competition in the interests of consumers. Based on our findings to date, we believe it is necessary to strengthen investor protection in a number of areas. We plan to consult next year on new rules to address the issues we have identified.”
Further work
Our ongoing research and investigatory work should be completed early in 2017. At that stage, the FCA will complete the post-implementation review and determine whether further consultation on rule changes is needed."
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Post by meledor on Dec 9, 2016 8:50:46 GMT
"certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors"
It may be counter intuitive to some that a feature such as a provision fund can introduce risks. There has certainly been a lot of discussion about the nature of these provision funds on various platforms - in fact often more discussion than the loans themselves - with very little resulting clarity or understanding. Hopefully the FCA will get to grips with the extra risks that these provision funds introduce and come up with measures that control their use.
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SteveT
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Post by SteveT on Dec 9, 2016 9:02:26 GMT
"certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors"
It may be counter intuitive to some that a feature such as a provision fund can introduce risks. There has certainly been a lot of discussion about the nature of these provision funds on various platforms - in fact often more discussion than the loans themselves - with very little resulting clarity or understanding. Hopefully the FCA will get to grips with the extra risks that these provision funds introduce and come up with measures that control their use.
I didn't read that as suggesting provision funds cause "extra risks" in isolation. The point I think being made is that provision funds can suggest that P2P lending is lower risk than is really the case (some lenders regarding a provision fund as akin to FSCS protection). I think the phrase "introduce risks to investors" really means "draw investors into risk exposure"
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pom
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Post by pom on Dec 9, 2016 9:15:10 GMT
"certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors"
It may be counter intuitive to some that a feature such as a provision fund can introduce risks. There has certainly been a lot of discussion about the nature of these provision funds on various platforms - in fact often more discussion than the loans themselves - with very little resulting clarity or understanding. Hopefully the FCA will get to grips with the extra risks that these provision funds introduce and come up with measures that control their use.
I didn't read that as suggesting provision funds cause "extra risks" in isolation. The point I think being made is that provision funds can suggest that P2P lending is lower risk than is really the case (some lenders regarding a provision fund as akin to FSCS protection). I think the phrase "introduce risks to investors" really means "draw investors into risk exposure" I read it the same way...and have to suspect that certain platforms with provision funds may take a while to get their authorisation !
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arbster
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Post by arbster on Dec 9, 2016 9:23:03 GMT
- the plans some firms have for wind-down in the event of their failure are inadequate to successfully run-off loan books to maturity
This for me was the stand-out finding. I'd say that this is an area it would be hard for platforms to get excited about, much like retirement planning or will-writing. I feel there is a strong argument for a standardised process for this, which defines a set of regulator-approved processes and deliverables, which must be demonstrably present for approval to be granted. A bit like an escrow process, it should be the case that in the event of platform failure a set of data should be readily available which fully describes all the pertinent details of every loan under management, including security, history, risk assessment, contact details, loan part holders, etc. Thus, any platform should be able to inherit another platform's loan book, or a central body could be funded (by the platforms) to step in and run down the loan book. While this might seem onerous, it seems far more efficient to do things consistently than to have many disparate provisions in place of varying quality, and it would also make it infinitely easier to regulate.
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jonah
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Post by jonah on Dec 9, 2016 9:24:19 GMT
Extending mortgage based standards...
Does this mean that the processes used by a regular bank in terms of due diligence will need to be followed by the bridging loan platforms? Surely that would be a significant issue for the speed of saving stream et al?
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dandy
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Post by dandy on Dec 9, 2016 9:24:52 GMT
The biggest platform with a provision fund is obviously RS but personally I think that RS do a decent job in disclosing the details of their provision fund, how it works and the impact of increased defaults.
Some of the the smaller platforms however provide very little detail on their PF and in some cases their PF is so laughably small (in % terms) that frankly they should be banned from advertising it's existence ... other platforms give no/insufficient detail on how their PF is deployed and should therefore also be banned from advertising it
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james
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Post by james on Dec 9, 2016 9:27:39 GMT
It may be counter intuitive to some that a feature such as a provision fund can introduce risks.
The FCA clarifies in the full interim response on page 9: " For example, the use of provision funds may obscure the underlying risk to investors, which may result in investors believing that platforms are providing an implicit guarantee of the loans they facilitate"
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Post by meledor on Dec 9, 2016 9:28:41 GMT
"certain features, such as some of the provision funds used by platforms, introduce risks to investors that are not adequately disclosed and may not be sufficiently understood by investors"
It may be counter intuitive to some that a feature such as a provision fund can introduce risks. There has certainly been a lot of discussion about the nature of these provision funds on various platforms - in fact often more discussion than the loans themselves - with very little resulting clarity or understanding. Hopefully the FCA will get to grips with the extra risks that these provision funds introduce and come up with measures that control their use.
I didn't read that as suggesting provision funds cause "extra risks" in isolation. The point I think being made is that provision funds can suggest that P2P lending is lower risk than is really the case (some lenders regarding a provision fund as akin to FSCS protection). I think the phrase "introduce risks to investors" really means "draw investors into risk exposure"
Not sure what you mean by "in isolation". If the introduction of provision funds "draw investors into risk exposure", as you put it, then surely they introduce risk to investors? Products that relying heavily on provision funds are usually quite opaque, hence the increased risk arising from the uncertainty.
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dandy
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Post by dandy on Dec 9, 2016 9:32:07 GMT
- the plans some firms have for wind-down in the event of their failure are inadequate to successfully run-off loan books to maturity
a central body could be funded (by the platforms) to step in and run down the loan book. Great idea!
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