New FCA rules on P2P take effect

New FCA regulations designed to prevent harm to investors, without stifling innovation in the peer-to-peer (P2P) sector, are coming into effect today.

The regulator’s new rules are intended to help better protect investors and allow firms and fundraisers to operate in a more long-term and sustainable manner.

In June, the FCA announced it would be refining its proposals and providing guidance to clarify that platforms will not be prevented from ‘including information about specific investments in their marketing materials.’

Commenting on the new rules, chair of the Society of Mortgage Professionals, David Thomas, said: “By clearly outlining levels of responsibility, firms can make it easier not just to identify areas of market abuse, but also to create a culture which promotes the fair treatment of customers.

“Aligning all financial services in this way will give customers greater confidence that a consistent and regulated system is in place. Ultimately, this will greatly benefit public trust.”

From today, the regulator is placing a limit on investments in P2P agreements for retail customers new to the sector of 10% of investable assets.

The FCA had previously said that the investment restriction will not apply to new retail customers who have received regulated financial advice.

Fitzrovia Finance CEO, Brad Bauman, added: “The new guidance from the FCA has been implemented to discourage individual investors from being over exposed to property investment platforms.

“For sophisticated investors, the opportunities available through our and other secured property debt platforms provide a great choice to diversify their portfolios and improve returns on their investments in a low interest environment and given a volatile stock market.

“However, we recommend that investments should be spread across a number of platforms and they should only make up part of your overall portfolio – certainly no more than 10%.”

The new rules have been praised by several lenders, including RateSetter CEO, Rhydian Lewis, who called the changes a ‘watershed moment’ for the industry, and ‘the moment that P2P investing came of age as an asset class.’

“Stronger regulation with harmonised standards means that people can invest in P2P with greater confidence than ever,” Lewis said. “P2P will now become a logical choice for any individual or financial adviser building an investment portfolio diversified across different asset types.

“For first-time P2P investors, 10% is a sensible place to start and once you are experienced you can invest more. This is exactly what we have seen over the last ten years, with people dipping their toe in and then growing as they see the value. The limit will become a target, encouraging every investor to think about diversifying some of their money into P2P.”

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