FCA to introduce limits to investments in peer-to-peer platforms

Among the changes it is introducing are measures to place a limit on investments in peer-to-peer agreements for retail customers new to the sector of 10 percent of investable assets.

The FCA said the limit is an important means of ensuring that investors do not overexpose themselves to risk. The investment restriction will not apply to new retail customers who have received regulated financial advice.

It comes less than a week after peer-to-peer lender Lendy entered administration.

In addition to the FCA’s 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 peer-to-peer platforms if they fail;
• Introducing a requirement that platforms assess investors’ knowledge and experience of peer-to-peer investments where no advice has been given to them;
• Setting out the minimum information that peer-to-peer platforms need to provide to investors;
• Applying the Mortgage and Home Finance Conduct of Business (MCOB) sourcebook and other handbook requirements to peer-to-peer platforms that offer home finance products, where at least one of the investors is not an authorised home finance provider.

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 peer-to-peer to continue to evolve sustainably, it is vital that investors receive the right level of protection.”