Wind-down plans have been proven to work out better when platform operators have stayed on board, according to an investment specialist.
Stephen Findlay (pictured), chief executive of BondMason, which previously allocated investor funds to property-backed and peer-to-peer loans, said platforms can save costs for investors by not appointing administrators.
Findlay has been focused on winding down the legacy BondMason Core direct lending service, returning 107 per cent of invested funds since its closure in 2019.
Some P2P lenders such as Growth Street have managed to close down with no issues but others including Lendy and FundingSecure have faced delays and high costs.
It comes as the Financial Conduct Authority last month called for regulated firms to improve their wind-down plans to ensure they have enough cashflow.
“What we have seen in the market ranges from some operators staying until the very end to ensure all positions are managed out and funds returned,” Findlay told Peer2Peer Finance News.
“In other cases, the companies are handed to administrators with operators stepping back, or away altogether.
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“Unfortunately, where administrators have stepped in, due to a lack of case law and precedent around how their services are paid for and loan collections can be distributed, we have seen significant proportions of underlying loan recoveries go to funding the administrator and legal fees.
“Often, lawyers are seeking court direction on how to act, as appropriate, but this discovery is being paid for by clients out of their investments and returns, not by the former operators or regulator. More central direction for the administrators would be beneficial for all here.”
Read more: P2P wind-downs that have worked
Findlay said managing the BondMason Core wind-down has meant a better outcome for clients.
“In a small number of cases, such as BondMason – although not technically a P2P platform – the operators stayed to manage down the wind-down process, and at their own personal cost,” he added.
“This has yielded a better outcome for clients than if an administrator was appointed.
“There was no requirement to do this, only a mindset of what was ‘the right thing to do’ – something that isn’t easily captured in a regulatory business plan or marketing literature.”