Mike Carter, head of platform lending at Innovate Finance’s 36H Group, has called for the City regulator to create a lower-risk category for P2P lending and equity crowdfunding.
Carter (pictured) said in recent months the P2P trade body has prepared a “comprehensive response” to the Financial Conduct Authority’s (FCA) CP22/2 consultation on strengthening financial promotion rules for high-risk investments, including P2P lending.
The paper said the FCA is planning to ban the promotion of investor incentives, to improve the risk warnings on ads and to strengthen appropriateness tests. The regulator plans to confirm its final rules this summer.
Carter said a lower-risk category should be created for P2P and equity crowdfunding and platforms should be able to communicate direct offer financial promotions without being limited to only high net worth individuals and restricted investors.
He said the 36H Group’s reply to the consultation, which closed for feedback last week, was made up of proprietary research on loanbook returns and losses across the P2P sector with input from members and other P2P platforms to “support the assertion that P2P is a low-risk investment product”.
In the coming months, the trade body will be focused on discussing its response to the consultation with the FCA and other stakeholders, Carter added.
“A lower-risk category should be created for P2P and equity crowdfunding,” he said.
“We consider that P2P and equity crowdfunding is of a low-risk nature and that additional risk warnings (appropriate to the product) alongside proposed positive frictions should be sufficient for the level of risk associated with these investments — enabling the restriction on marketing only to certain categories of retail consumers to be removed.
“In other words, for P2P and equity crowdfunding, we are supportive of applying additional customer journey safeguards as proposed in CP 22/2, but then we suggest that P2P and equity crowdfunding firms should be permitted to communicate direct offer financial promotions without the precondition that this marketing be limited only to HNW sophisticated investors and restricted investors.”
Carter said 36H Group members can benefit from wider Innovate Finance groups with a “holistic view” to help them, for example, P2P small- and medium-sized enterprise (SME) and property lenders can be represented in SME lenders groups.
“We’ll be representing P2P SME and property lenders as part of our wider SME lenders group in discussions with government on post-Covid guarantee and funding support schemes,” he said.
“For consumer lending platform members, we’ll be actively involved in assessing the new consumer duty rules when they’re published in the summer.
“As a result, our P2P members will have access to a very wide range of policy expertise and representation in the year ahead.”