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New FCA Rules on Marketing “Change the Ethos of P2P Lending”

Ross Kelly


FCA Rules P2P Lending

FCA rules “change the ethos of P2P lending, which was to lend to consumers directly through online platforms,” says Orca Money co-founder, Iain Niblock.

Iain Niblock, founder of Edinburgh-based P2P investment platform, Orca Money, has issued a warning over the Financial Conduct Authority’s (FCA) overhaul of the peer-to-peer lending market.

Earlier this week, the FCA confirmed the introduction of new rules which aim to prevent harm to investors. The FCA said that the new regulation will improve investor security “without stifling innovation in the peer-to-peer sector”.

Christopher Woolard, executive director of Strategy and Competition at the FCA, said that for the P2P market to “evolve sustainably” then investors must receive a greater degree of protection.

“These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities,” Woolard said. “For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”

The overhaul by the regulator, Niblock believes, could risk changing the origins of the industry and will likely lead to institutional investors dominating the market.

Changes introduced following the P2P post-implementation review would provide greater protection for investors in regards to wind-downs, increased governance and also a clearer understanding of the investment they are making, Niblock concedes. However, he has expressed concerns over new marketing rules in particular.


From the 9th of December 2019, P2P platforms will be limited to marketing products to those who are certified as sophisticated or high-net-worth investors, people who receive regulated advice, or those who certify that they will not invest more than 10% of their net investible portfolio in P2P loans.

In order to ensure investors understand the risks, peer-to-peer platforms will have to introduce appropriateness assessments. Niblock warns that this goes against the original aims of P2P, which is to link lenders and borrowers directly.

“It changes the ethos of P2P lending, which was to lend to consumers directly through online platforms,” he says. “Now that has morphed to institutional investors agreeing to fund large amounts of loans on lending platforms.”

Niblock insists that due to the size of the P2P market, which continues to grow, over-regulation could have a negative impact moving forward and has the potential to negatively impact the innovation currently ongoing in the market.

“P2P is still a small but rapidly growing market, so it feels too early to overly regulate. Over-regulation at this stage will stifle innovation,” he asserts.

“It is sending a mixed message as, on the one hand, you have the Innovative Finance ISA, which is good for investors, but then there are marketing restrictions, which is the equivalent of a warning for investors,” Niblock added.

These mixed regulatory messages could alter prospective investors’ mentality and will “make people think twice,” he explained, as they will likely view P2P as a riskier asset class.

“I don’t agree with the marketing restrictions. The regulator should still be trying to innovate and encourage people to launch solutions.”

These changes, Niblock speculated, could lead to European P2P platforms growing in popularity. As they do not fall under FCA regulation and can implement different business models, an influx of investors could be imminent.

Ross Kelly

Staff Writer

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