DISRUPTING THE CREDIT CARD MARKET
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Elfin Market’s Mansour Bouaziz talks to P2PFN
Secured lending special report supported by
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CROWD BONDS
What investors need to know
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ISSUE 33 | JUNE 2019
P2P industry readies for investor marketing restrictions PEER-TO-PEER lending platforms are gearing up for the introduction of appropriateness tests, in anticipation of the outcome of the Financial Conduct Authority’s (FCA) review into the sector. The City watchdog is expected to release final rules on reform of the P2P sector this summer, following controversial proposals released last year which mooted the introduction of categorisation and appropriateness tests for P2P investors. The industry on the whole has supported the introduction of appropriateness tests but expressed concerns about the way they would be implemented and resulting costs. Firms are now working together on solutions. The Tax Incentivised Savings Association (Tisa) has established a working group to create a standard approach for appropriateness tests, which it will present to the FCA. The investments trade body created a similar framework in response
to the revised Markets in Financial Instruments Directive (MiFID II) – EU regulations that mandated a greater breadth of investment firms to implement appropriateness tests, although this did not include P2P platforms. “The guide will help firms and their customers determine whether and to what extent P2P is appropriate for nonadvised customers,” Jeffrey Mushens, technical policy director at Tisa, said. “This would provide an alternative to the approach of restricting investment
in P2P to investors who can demonstrate that no more than 10 per cent of their investable assets could be invested in P2P. “The working group is made up of representative industry members and we are aiming to publish a draft guide in June.” The group is chaired by Jake Wombwell-Povey, founder of direct lending investment manager Goji, and 15 P2P platforms are members including ‘big three’ lender RateSetter. “We want to have an actionable guide so firms can implement the test,” Wombwell-Povey said.
“The FCA will not endorse anything but have engaged with Tisa in the past. “We hope by developing a best practice guide, they will engage in a similarly constructive manner. “Clearly some platforms will have more resources to introduce this than others. “The objective of the working group is not to lower costs but to develop a best practice guide.” Mario Lupori, chief investments officer at RateSetter, said an appropriateness test can be “very effective in ensuring that investors understand the nature of P2P investments, while not restricting access.” Crowd bond platforms such as Downing and Abundance already require investors to pass appropriateness tests as they fall under the MiFID regime. The tests aim to ascertain investors’ knowledge on a range of issues, such as whether they understand their capital is at risk or the lack of >> 4 Financial Services