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Post by stevefindlay on Sept 23, 2016 18:06:15 GMT
Steve That is much better, thank you. I don't need to know the exact identities of the shareholders but knowing the split is helpful. The key issue though is BCL. While I am sure you have every good intention towards investors, the fact is that there is the potential for a conflict of interest between your position in Bondmason and you as a director and the sole shareholder of BCL. I am also uncomfortable with you being a creditor of BCL. What for instance if you got into financial difficulty? Your trustee in bankruptcy would have a duty to get in all available assets for the benefit of your creditors, including the loan you have made to BCL. If BCL didn't have the funds to repay the loan, the trustee could go after the P2P loans and put investors at risk. This potentially throws the risk of your investment in BCL onto investors. This may all sound fanciful but stranger things have happened and it highlights the weaknesses in the structure. If you are going to report to your Board on BCL you may wish to alert them to this thread. My real preference would be for BCL to be in the hands of an independent professional trustee/custodian with a clear duty to represent the interests of investors. Enjoy your time away with your family. I hope we are not giving you too much indigestion. - Conflicts of interest: managing conflicts of interest is common in the investment management industry. Which is why it's important that we have significant experience of working with doing this on a practical basis, at leading blue chip investment houses, over many years each. No legal construct will ever remove these comflicts entirely, so strong governance and good experience is key. - Impact of my own solvency: one of the items being proposed is an option for BM to buy the company / take over the loan I have used to finance the company etc in the event of unattractive circumstances for BCL or myself. I'm not going to present my own financial position, but I'd hope this is a very remote scenario (however, I am will to state that my only indebtedness is the mortgage on my primary residential property, which is modest). - Custodian bank: we looked at this, but the main banks are unable to provide this on terms which would work for our clients - the cost per loan would simply be too high. Whether this is in place from the outset, or as part of a living will arrangement. - A stand in trustee model may feature as we scale though, without the custodian bank. This is TBC. - Indegestion: none yet; but as it's 7pm on a Friday, a glass of wine may be in order...
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Post by ratehopper on Sept 24, 2016 10:09:13 GMT
Steve, I have no wish to pry into your personal finances. I was just using this as an example of BCL's vulnerability. The important thing is that the loan book should be ring-fenced for the benefit of investors. That is essentially what we are investing in. I understand that a bank's custodian services might be disproportionately expensive in these circumstances, although I am encouraged that you considered the point as it does mean that your thinking has been aligned to what I am saying. I assume that there is no economic value in the loan book for BCL - the value of the loans is exactly mirrored by the liability to pay out capital and interest under the receivables. If that is the case, then why can't BCL execute a declaration of trust over the loan book in favour of investors? It seems to me that nothing is lost to BCL by doing this, but the trust would protect the loan book from an administrator or liquidator in the event of BCL's insolvency. Just a thought. There must be a relatively simple way of protecting investors in this respect. In short investors want to invest in the loan book, not in BCL with all the vulnerabilities this entails.
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Post by stevefindlay on Sept 24, 2016 10:39:00 GMT
Steve, I have no wish to pry into your personal finances. I was just using this as an example of BCL's vulnerability. The important thing is that the loan book should be ring-fenced for the benefit of investors. That is essentially what we are investing in. I understand that a bank's custodian services might be disproportionately expensive in these circumstances, although I am encouraged that you considered the point as it does mean that your thinking has been aligned to what I am saying. I assume that there is no economic value in the loan book for BCL - the value of the loans is exactly mirrored by the liability to pay out capital and interest under the receivables. If that is the case, then why can't BCL execute a declaration of trust over the loan book in favour of investors? It seems to me that nothing is lost to BCL by doing this, but the trust would protect the loan book from an administrator or liquidator in the event of BCL's insolvency. Just a thought. There must be a relatively simple way of protecting investors in this respect. In short investors want to invest in the loan book, not in BCL with all the vulnerabilities this entails. - I don't mind your questions at all, they are all fair and well put - thank you! I seem to remember from a couple of years ago, that there was a possible regulatory issue with the Trustee model. But there may be some middle-gound which is now possible. I'll ensure it is looped into the current legal review. And yes, the value of the loans is directly mirrored by the Receivables. Although, BCL does gets a return for any period that it holds loans before the corresponding Receivables are purchased. So the value of BCL does increase over time (slightly), which should give some additional comfort to clients.
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Post by ratehopper on Sept 25, 2016 10:09:49 GMT
Steve, if something is possible along these lines then I think it would be a great comfort to investors and a positive selling point for Bondmason. Just from a few of the comments in this thread, it seems some investors are willing to stick a toe in the water but this is one of the issues holding them back from a full scale investment. If you could keep us posted on developments with your legal review that would be very helpful.
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Sept 25, 2016 12:19:48 GMT
I think what Paul123 is saying is very true, many of us would like to be hands off, but to do that we must first be very confident in the platform, until then we feel we have to keep a sharp eye on everything.
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Post by henders on Sept 25, 2016 16:18:58 GMT
I am currently a very happy BM investor. I have quite a few £K lent out and I like; the lack of effort involved, the rate, the speed of lending, the communication and the excellent software.
However, the questions/issues raised by ratehopper appear to be very valid (and constructive) and may well prevent me from going too much further. iIt does seem that it could be possible for BM to modify the relationship with BCL (or somehow involve a third party) and by so doing "protect" investors better against potential platform/company failure.
I hope stevefindlay is able to continue this dialogue and to establish whether the level of "protection" being sought is possible.
I also hope stevefindlay doesn't get too weighed down by these discussions as most (if not all ) of us appear to be very supportive of BM and would like to see it being as successful as possible.
It's certainly got off to a great start.
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Post by ratehopper on Sept 26, 2016 7:26:43 GMT
Thank you henders. I agree with your sentiments. I like BM but I believe these issues need to be addressed. If a solution can be found then in my view it will only make BM stronger which will benefit them and us.
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Post by stevefindlay on Sept 28, 2016 19:41:08 GMT
I agree that there are some very constructive questions and comments here. We've taken these on board and will report back with any updates & amendments in due course.
Thank you for all your input.
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shimself
Member of DD Central
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Post by shimself on Nov 10, 2016 12:26:17 GMT
I agree that there are some very constructive questions and comments here. We've taken these on board and will report back with any updates & amendments in due course. Thank you for all your input. Any news?
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Post by stevefindlay on Nov 10, 2016 12:52:43 GMT
I agree that there are some very constructive questions and comments here. We've taken these on board and will report back with any updates & amendments in due course. Thank you for all your input. Any news? Quick interim update: BCL structure etc: we've appointed our corporate lawyers ( Mishcon de Reya) to re-review the existing structure as created by our Regulatory and Structuring lawyer, to see if & how it can be tightened up. They presented initial findings on BCL's funding routes last week, without any areas of concern and/or suggestions for improvements; they are now considering a couple of other angles relating to the broader structure which they are looking in to. We expect to be able to report back in the coming weeks. Reporting and audit trail: monthly statements should be available around the end of the year.
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