Following consultation, the Financial Conduct Authority (FCA) is introducing rules designed to prevent harm to investors, without stifling innovation in the peer-to-peer (P2P) sector. When the FCA set its first rules for P2P, it committed to keep these under review as the sector evolved. These new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner.
Christopher Woolard, Executive Director of Strategy and Competition at the FCA said:
'These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.'
The FCA has refined its proposals to ensure the new rules protect consumers and support the P2P market. In particular, additional guidance has been provided to make it clear that platforms will not be prevented from including information about specific investments in their marketing materials.
As originally proposed, the FCA is placing a limit on investments in P2P agreements for retail customers new to the sector of 10 per cent of investable assets. This is an important means of ensuring that they do not over-expose themselves to risk. The investment restriction will not apply to new retail customers who have received regulated financial advice.
In addition to these restrictions, the new rules cover:
- More explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise, with a particular focus on credit risk assessment, risk management and fair valuation practices.
- Strengthening rules on plans for the wind-down of P2P platforms if they fail.
- Introducing a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.
- Setting out the minimum information that P2P platforms need to provide to investors.
- Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other Handbook requirements to P2P platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.
P2P platforms need to implement these changes by 9 December 2019, except for the application of MCOB, which applies with immediate effect.
The FCA will continue to closely monitor the P2P market as it develops further.
Notes to editors
- PS19/14: Loan-based ('peer-to-peer') and investment-based crowdfunding platforms: Feedback to CP18/20 and final rules
- CP18/20: full consultation paper
- The interim feedback to the Call for Input to the post-implementation review of the FCA’s crowdfunding rules
- On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the PRA. On 1 April 2014, the FCA took over responsibility for consumer credit regulation and loan-based crowdfunding became a regulated activity.
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this, it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.