At the end of July, the Financial Conduct Authority (FCA) published their proposals for P2P regulation following an investigation started in 2016. In general, these proposals will mean much more thorough regulation of the sector and aim to achieve greater protection for investors’ money. Kuflink achieved FCA authorisation in 2017 and have committed ourselves to market-leading due diligence, and providing a transparent approach to investing.
Just in case you missed it, here are 5 key points from the FCA review that all P2P investors need to know:
1. Managing Returns and Interest Rates
In order to make P2P investing more transparent for investors, the FCA have proposed a number of new regulations with regards to returns. These include making sure that target returns are achievable, that returns reflect risk, and that platforms fully understand and account for credit risk.
2. Extended Marketing Restrictions
In response to the sometimes complex risks posed by some loan-based investments, there are plans to implement a more extensive set of marketing regulations for P2P platforms.
3. Minimum Information Standards
Although many platforms go to great lengths to ensure sure their investors are well-informed about every opportunity, there are some firms that fail to provide much information. Under new rules, the FCA plan to implement minimum requirements to help investors make better decisions when it comes to managing their portfolios.
4. Strengthening Wind-Down Procedures
Regulated P2P firms are already required to have a wind-down procedure, but this currently doesn’t have to take certain practical challenges (such as the IT systems that underpin investments) into account. The FCA plan to make these considerations compulsory so that, should the worst happen, platforms are fully prepared and investors are protected as far as possible.
5. Additional Regulations for P2P Firms
As the sector has grown, business models have become increasingly more complex, and the current regulations do not fully account for this. The FCA plan to impose more general regulations that reflect the market as it currently is, and are adaptable to cover future innovations too.
You can read the report in full here