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All you need to know

All you need to know

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What you need to know about the FCA's P2P Policy Statement

On June 4th 2019, the Financial Conduct Authority released its long-awaited Peer to Peer (P2P) lending final rules. The document heralds a raft of new regulations, but there are no big shocks in the 100 or so pages.

Christopher Woolard, Executive Director of Strategy at the FDC, had this to say about the new rules. 

“These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities.”

 

What's it all about?

After a long consultation and discussion period which began in July 2018, the Financial Conduct Authority recently released a new set of rules governing P2P investments.

No alarms and no surprises. There's nothing we didn't expect and the new regulations are more clarification points than anything else.

 

Will it affect your investment?

As an existing investor with Landbay, there won’t be any changes to your investment. As a responsible and FCA regulated financial organisation, our commitment to transparency is paramount. As such, we not only welcome the FCA's clarification, we've been working hard to ensure we comply fully with the rules.

 

So what's new?

The main changes relate to the different kind of investors seeking P2P products and how P2P firms market those products. One of the most significant of these changes is a 10% cap on the amount of capital those the FCA deem ‘ordinary investors’ can invest via P2P.

In real terms, this means that unless investors have a high net worth or sought professional advice, they can only invest up to of 10% of their capital in a P2P vehicle and it’s up to investors to self-certify to this fact.

The FCA statement also lays out new regulations on how P2P platforms can approach, collate and communicate with potential investors.

In short, it will be up to the provider to vet future clients and to take steps to determine which kind of investment category they fall into (depending on their level of sophistication and understanding of investments) and take the required steps to steer them toward a suitable product.

 

Other changes

In addition to some much-needed clarification, the FCA has also put a series of fail-safes into play. These strict guidelines will ensure lenders and investors have viable exit strategies in the event of a wind-down. This comes in the form of more rigorous rules, risk assessments and transparency relating to worst case scenarios.

Alongside these stricter regulations, the FCA now requires P2P lenders to be more open with their investors about the risks involved in the P2P industry.

Ahead of the FCA ruling, last month we published a ‘Stress Test’ showing what would happen to investments, should there be a severe downturn in the economy as we are committed to ensuring you have the right information to support your investment decisions. You can read about that here.

In all, the new policy document from the FCA is a welcome nudge towards mainstream recognition. According to the FCA, P2P lenders have until December 9th 2019 to fully comply with the new rules.

You can download the entire document here :https://www.fca.org.uk/publication/policy/ps19-14.pdf

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