The FCA would like our help

loads of good points already on this thread by all and just a couple of comments I had on these ones below.

3. Pooled risk accounts - are they true p2p? Are "black box" accounts appropriate for retail investors? Are they actually "collective investments"? If so would it be more appropriate to sell them as investment products eg an investment trust rather than as a "savings account"?

I think for mainstream ISA-type investors pooling/diversification is critical. It is too easy for an un-savvy saver to put all their money into 1 or 2 or 3 loans without being aware of the importance of diversification.  And lose all/large part of their investment. Diversification is key to being relatively "safe". Where investments are pooled investors losses would have to be proportionate to some degree against a platforms overall success/failure. So un-savvy investors will naturally have some form of protection as the platforms interests are more closely aligned with investors. Black box is a totally different point but I agree that more transparency is needed. AC QAA for example is a great account/product, but there is no transparency as to the loans/cash held within it and that should change. 

4. Maturity transformation and lack of transparency.

Accounts offering good/instant liquidity are great. They should be welcomed as they serve a great purpose for many. However the fall back position for investors for all platforms should be made VERY clear. i.e. on RS, let's face it, in doomsday scenario you are waiting up to 5 years (plus roll over) to get all your money. On Landbay it may be 10 years. On AC we cant know but also therefore up to 10 years. There should be no restriction on offering these products at all, BUT platforms must make it clear to investors that they must be prepared for the eventuality that instant access is not possible and could actually take 5 years if economy/loanbook turn sour, new lenders are reducing etc. Fees also need to be far more transparent, for all sell-out features.  

(3, 4, 5 and 6 are of relevance to anybody concerned about regulatory arbitrage)

I dont think this is regulatory arbitrage. There are many BIG differences between a bank and the accounts discussed above.

1. no FSCS. 
2. banks are lending as principle, the above are not.
3. banks are systemically important, the above are not.
4. banks DO guarantee liquidity. The above do NOT, or at least should not. They offer it where they are able to. 
5. as far as collective investment schemes go, yes all of P2P frankly falls into that category, hence the recent exemption of P2P platforms from being CIS. 

there are many other differences also 

I work in the property industry where developers often take small equity stakes in the developments they manage for others. This does not provide alignment of interests because the profits are predominantly from fees for the developers and not the performance of the development. I think P2P is the same as any proportion is likely to be small and the return on this will be small compared to the fees the platform receives. Even first loss arrangements don't align interests fully as these remove the benefit to the provider to put effort into making significant recoveries as they will have lost their share unless most of the loan is recovered.

My issue with it is that it would weaken platforms when they are under pressure due to losses and so significantly increase platform risk - the risks I am most sensitive too. Personally I am conservative in my lending, but invest on the basis that the diversification I have means that the risk of losing a high proportion of my capital (without a general collapse in finance that would effect everything) is extremely low. I could not comfortably afford to lose more than 20% of my P2P balance, but am comfortable the risk of this is tiny. Anything that increases this is a concern to me.

- PM

I don't know how practical it is but I'd like to see a time limit in which a borrower has to repay before the loan must enter default. Maybe 90 days? Or the loan has to be formally extended with interest paid.

Platforms shouldn't be allowed to continue allowing default interest to mount up as it makes a potential loss bigger.

Because if one goes the sophisticated investor route a) many current investors will be excluded (on income and assets qualifications) and b) P2P will never become "mass market" (which might, or might not, be desirable depending on your point of view)

There are no such restrictions on gambling (or other equally efficient ways to lose / waste money) so I don't see why should P2P be any different. The key thing is to ensure that lenders are presented with loan information that is clear, fair and comparable. What they then choose to do with it is their call.

I see it in this way.
It is my money. It is my life. I have the right to do what I want, sophisticated or not.

Just not meeting the criteria of "sophisticated" does not mean that I am stupid. After all why should not an investor take responsibility for his/her own action?
Why should I be restricted to a small percentage of what I own when others can mortgage all they have and invested in a company, venture capital, call it what you want?

This is why in my previous post I mentioned that valuation documents need to be available to investors with no wording that excludes them.

I would be very interested if someone could explain to me what criteria i need, for me to be classed as a "Sophisticated Investor"