Although we are yet to see the legislative changes required to include peer-to-peer loans in the new Innovative Finance ISA from April 2016 and regulate advice on P2P loans, the Financial Conduct Authority has helpfully set out its proposed approach for when the law does change. We have until 31 December to respond. Broadly, the FCA proposes to:
- give guidance on how disclosure rules will apply to including P2P loans in an IFISA - particularly where the P2P platform only has interim permission (pre-April 2016) and risks arising if the firm does not get full authorisation;
- consult on applying suitability rules to advice on P2P loans, including changing the application of the rules and banning the payment or receipt of commission in relation to making P2P loans (note that the regulation of advice generally is being reviewed, so those rules could also change in due course anyway); however, because direct holdings of shares and other investment instruments are not included in the list of products that independent financial advisers must consider when making recommendations, P2P loans will also be excluded from that list; and
- ensure any risks related to IFISA inclusion are disclosed, like whether they can be transferred or sold (the FCA considers P2P loans to be "a much higher-risk alternative to buying an annuity" but doesn't mention the risk compared to
buying a Lamborghiniother types of investment that also compete with annuities).