Recent Changes to FCA Rules for P2P Lending Platforms

The FCA has announced some changes to rules on P2P lending (explained amongst other non-P2P changes here). Feedback on the prior consultation papers and final rules are here.

You should consult the listed FCA Handbook sections for the detailed changes, but in summary they are designed to: 

• simplify client money requirements for P2P platform operators that hold money in relation to both regulated and unregulated peer-to-peer business which come into force immediately on 21 March, as they are helpful. The rule changes and related guidance are in: 

Glossary; SYSC 4; CASS 7; TP 1, Schs 1 and 2; SUP TP 1 

• support the introduction of the Innovative Finance ISA (IFISA) and new regulated activity of advising on P2P agreements, by clarifying the FCA’s expectations about standards for IFISA disclosures and establishing a regulatory regime for the provision of regulated advice on P2P agreements that reflects the recent changes to the Regulated Activities Order. The rule change come into force on 6 April 2016. The rule changes and related guidance are in: 

Glossary; SYSC 1 and 4; TC 2, App 1.1 and 4.1, TP 8; FEES 4; COBS 2, 4, 6, 9 and 14; CASS 7; SUP 10A, 12, 16, App 3; DISP 2; COLL 6; and PERG 1, 2, 5, 7, 8, 10 and 13

P2P #ISAs: FCA's Approach

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 Lamborghini other types of investment that also compete with annuities).