Lending Works announced that they received full authorisation by the FCA. It is the first P2PFA member to receive that status. Lending Works plans to launch their IF ISA offer in January 2017. Some smaller new entrants already had full authorisation, while the main players still operate on interim permission awaiting approval.
Lending Works writes:
We’re fully authorised by the FCA
We are thrilled to announce that we’ve today received official confirmation from the Financial Conduct Authority (FCA) of our full authorisation as a financial services provider. This is a momentous occasion for Lending Works, and also means we are the first of the peer-to-peer lending platforms operating under interim permission to receive this approval.
It marks the end of a thorough, 12-month review in which our processes, systems, policies, financials and levels of compliance and risk management have undergone intense scrutiny from the UK’s primary financial services regulator, and this green light from the FCA represents the ultimate stamp of approval. We hope that this news will further underscore your confidence in us, and all that we stand for.
Our ISA is coming soon
With this FCA approval in hand, it now paves the way for us to apply to become an ISA Manager with HM Revenue & Customs. Once this formality is complete, we’ll be eligible to deliver the Lending Works Individual Savings Account (ISA), a product we plan to launch in January. We are waiting until January to launch our ISA for a number of reasons, namely: the expected waiting period for obtaining ISA Manager approval, the fact that we have other major releases planned for the next couple of months, avoiding launching before or during the Christmas break, and to align the launch with the January-to-April ‘ISA season’.
New branding, website and user dashboard
In a few weeks’ time, we will launch new branding that we hope is befitting of our position as an innovative financial services technology firm. In addition, we will launch an easy to navigate, simple-yet-informative new website and intuitive new user dashboard. We will introduce you to the new brand, website, logo and lender dashboard closer to the time of launch, but we are confident it will further enhance your customer experience.
Finally, we have also got several new major partnerships going live soon too. These partnerships will bring more and more high-quality borrowers to our platform, which in turn will benefit you, our lenders.
But for now, we hope you will share in our delight at having made this significant step up with the FCA – a launchpad we believe will drive us towards even bigger and better things. …
This is a guest post by Hungyi Chen, Ph.D. candidate at the Graduate School of Law, Nagoya University. He is researching alternative finance in East Asia.
1. Relevant Background
Internet finance, including (1) online stored payment by non-bank, (2) crowdfunding and (3) peer-to-peer lending becomes hotly debated issues in Taiwan recently. To boost the development of financial innovation, the regulation of online stored payments by non-banks was already implemented on January 2015 after discussions and debates between financial authority and platforms. Besides, a regulatory framework for equity-based crowdfunding has also been enacted in the end of April 2015 and amended in the early of January 2016.
In order to encourage and accelerate the development of fintech industry in Taiwan, the financial authority, Financial Supervisory Commission (FSC) of Taiwan, has published Fintech Development Strategy White Paper on May 2016[i]. One of main goals is evaluating the possibility of introducing the mechanism of P2P lending into Taiwanâ€™s capital market and providing a regime for regulating this industry.
Some business models of P2P lending are forbidden due to conflict with The Banking Act[ii] in Taiwan. Recently, it is considered to be introduced in Taiwan and evaluated by the recently established project team of the financial authority in Taiwan, Financial Supervisory Commission (FSC)[iii]. Despite the fact that the attitude toward P2P lending industry of financial authority in Taiwan is still vague, as of July 2016 there are three P2P lending platforms already providing their services in Taiwan, including Lend & Borrow[iv], Wow88[v], XiangMinDai[vi]. They have tried to design their business model to avoid potential legal risks. For better understanding of the P2P lending industry, this article tries to provide a brief regulatory overview of Taiwan in following part.
2. Regulatory Overview of P2P lending
Currently, there is no any specific regulation toward this industry in Taiwan. Recent official document[vii], indicate that the business model of P2P lending in Taiwan should avoid to involve in any activities of accumulating capital from general public or issuing any securities. XiangMinDai, a P2P lending platform in Taiwan, has analyzed by FSC of Taiwan. The former chairman of FSC of Taiwan, Ms. Wang, has stated that ‘â€¦the business model of XiangMinDai is majorly providing services of debt transaction, which does not involve in activities of depositing or charging fund. Accordingly, it is not the regulatory scope of FSC at this momentâ€¦[viii]‘
Although there is no any financial regulation of P2P lending in Taiwan, Banking Bureau of FSC has issued a statement[ix] on April 14, 2016, pointing out some legal compliance issues for P2P lending platforms, including (1) platforms should not involve in issuing any securities, (2) ensure privacy of customers, (3) activities of deposit and store-value business without licenses are forbidden, (4) illegal ways of debt-collection is forbidden.
Within 2 weeks, Banking Bureau of FSC, announced another statement[x] for supplement, indicating that (1) the interest rates of the case on the P2P lending platform is 30.15%, which may be illegal according to Criminal Act in Taiwan[xi], (2) legal concern of breaking the law of Multi-Level Marketing Supervision Act[xii] and Fair Trade Act[xiii]. Continue reading →
This is a guest post by Hungyi Chen, Ph.D. candidate at the Graduate School of Law, Nagoya University. He is researching alternative finance in East Asia.
1. The recent development of online alternative finance
Given the recent trend that Fintech is rapidly growing in the world, in order to maintain the role of international financial center, the financial authority of Hong Kong has been aware of issues relating to Fintech industry. On November 13th, 2015, Stored Value Facilities Payment Systems, such as online stored payment business as PayPal, is allowed to operate by non-bank. This is a milestone for Hong Kong including non-bank of operating business highly relevant to conventional bank.
In order to enhance the development of startups in Hong Kong, financial technologies (Fintech) are emphasized by the authority since the investment of Fintech is a target of many venture capitalists. Nevertheless, compared with other jurisdictions in Asian countries, which already lightened entry requirement to encourage non-bank for engaging business of equity-based crowdfunding, such as Japan, Korea, Malaysia, Taiwan, and Thailand, the entry requirement of Fintech, especially alternative finance may be stricter in Hong Kong.
Until now, there is still no equity-based crowdfunding platform established in Hong Kong. However, the huge demand from capital market gradually leads the development of crowdfunding in Hong Kong, especially debt-based crowdfunding, which is also known as Peer-to-Peer Lending. Currently, there are 4 major peer-to-peer lending platforms, including BestLend, GoLend, Monexo, and WeLend.
2. Relevant industry background
With unique selling factors, the peer-to-peer lending platforms may have a rapid growth in the near future. On one hand, from viewpoints of investors, the deposit rates of savings are from 0%~0.001%. Even the deposit rates of fixed deposit of 12 months are from 0.15%~0.2%. Additionally, inflation rates are around 4% continuously in 2013 and 2014, which means the real interest rate may be negative in Hong Kong. Accordingly, there are strong incentives for investors to vitalize their capital.
On the other hand, from viewpoints of borrowers, there are two fundraising channels for loans, including banks (Licensed Banks, Restricted License Banks, Deposit-taking Companies) and Money Lenders. Since the financial authority restricted the mortgage market of banks to prevent a real-estate bubble, it is difficult for borrowers to get the loan amount they need from banks by mortgage. As a result, they turn to Money Lenders as an alternative opportunity. Although the interest rates of Money Lender are generally higher than banks, compared with banks which normally take 1-6 weeks for examining procedure, the process of Money Lender is more simplified. Continue reading →
This is a guest post by Pawee Jenweeranon, a graduate school student of the program for leading graduate schools – cross border legal institution design, Nagoya University, Japan. PaweeÂ is a former legal officer of the Supreme Court of Thailand. His research interests include internet finance and patent law in the IT industry.
In the recent years, it is inevitable that the financial technology or Fintech takes the significant role toward the evolution of financial services industry in this region. In other words, Fintech normally be used to improve the financial industry services.
In 2015, theÂ Monetary Authority of Singapore (hereinafter referred to as â€œMASâ€)Â has committed two hundred twenty five million Singapore Dollar (around 166 million USD) to support the development of Fintech industry for the startup ecosystem in the upcoming years. This is a good reflection of the significance of the financial technology or Fintech development in Singapore.
From the economic perspective, Small and Medium Enterprises (hereinafter referred to as â€œSMEsâ€) are important part of Singaporeâ€™s economy. SMEs account for 99 percent of all registered enterprises in Singapore. From this reason, enhancing the competitive capacity of Singapore SMEs is essential for Singapore economy development. Â Even almost all of the SMEs in Singapore are supported by the Governmental Enterprise Development Agency and Centers, (more than 100,000 SMEs got funding support by the Singapore government); however, internet financial technology was also proposed as an alternative mechanism for enhancing the competitiveness of Singapore SMEs in the recent years.
2. Regarding Peer to Peer Lending
2.1 Background Generally, there are many peer to peer lending platforms in Singapore; however, they normally lend money to businesses rather than individuals due to the strict regulation for money lenders. The additional limitation on lending to low-income borrowers who are Singaporean citizens or permanent residents which is another requirement should be considered by the lenders.
In general, money lending in Singapore is mainly regulated by the Moneylenders Act 2010 and the Moneylenders Rules 2009. For the Moneylenders Act 2010, due to the main purpose of this act is to develop consumer protection mechanism to protect borrowers of small amount loans, this is the reason why the act provides stringent limitation for moneylenders to operate their business. This is another key different of money lending law of Singapore compared to other countries in Asia such as Hong Kong which focusing more on lending activity. Briefly, the act requires moneylenders to hold the Moneylenders license with obligations and limitations for licensee.
In Singapore, even there are strict regulations in the existing law relating to a money lending business; however, there is the legislative effort of the Singapore government to address the issue regarding Securities-based Crowdfunding, which can reflect the understanding of the Singapore government toward the development of Financial Technology (Fintech) and the supporting regulatory framework.
2.2 TheRegulatory Framework for Peer to Peer Lending Business
From the document published by the MAS on Lending-based Crowdfunding â€“ Frequently Asked Questions (FAQs), generally, the operation of P2P lending is restricted by MAS under the Securities and Futures Act (Cap. 289) (SFA) and the Financial Advisers Act (Cap. 110) (FFA).
Specifically, the P2P lending business needs to prepare and register a prospectus with MAS in accordance with Section 239(3) of the SFA. In addition, not only the registration of the prospectus but also the P2P lending platform need to follow the licensing requirements, particularly, the P2P lending business which fall within the scope provided by MAS needs to hold a Capital Market Services (CMS) license. Continue reading →
The Spanish Securities Exchange Commission (CNMV, Spainâ€™s financial regulator) has authorized MytripleA as a Platform for Participatory Financing, the formal name for a p2p lending platform. This is one of the first actions to implement Law 5/2015 Promotion of Corporate Financing. MytripleA already benefits from a Payment Institution license (which can be passported within the EU) granted by the Bank of Spain, which authorizes MytripleA to make loan disbursements and receive loan instalments within the regulatory environment for banking payments. This is an additional regulatory requirement in Spain, which is not required by other European countries.
With this new authorization, MyTripleA becomes the first crowdlending platform to have both of the required authorizations in Spain. Competitors entering Spain, will not be able to use the the so-called passporting provisions from a financial regulator outside of Spain and will need to apply for a Platform for Participatory Financing license before being able to operate in compliance with Spanish regulations Law 5/2015 Promotion of Corporate Finance provided a unified legal framework for crowdlending platforms and securitized funds, and made CNMV responsible for their creation, authorization and supervision. Crowdlending has experienced rapid growth across Europe. The Spanish market last year grew 266% according to the website P2P-Banking.com. Within the new regulatory framework and with the supervision of CNMV, a greater degree of awareness of the alternative financial services market is expected.
French Lendix announced that it received its formal CNMV accreditation to operate as a P2P lending platform in Spain. The Spanish entity will be the first Lendix international market to open. It will target financing of credits to SME, for amounts ranging from 30,000 to 2,000,000 Euro, duration of 18 to 60 months and at interestrates comprises between 5.5% et 12%. Companies presented on the platform will be selected and analyzed by Lendix credit analysis team and will need to generate a turnover of at least â‚¬400â€™000. Non accredited private investors* will be able to lend up to 3,000 Euro per project with a total maximum yearly amount of 10,000 Euro, while no limit will apply to accredited private investors nor institutional investors. The launch of Lendix’s spanish platform is scheduled for Q4 2016.
Equity crowdfunding platform Crowdcube also received authorization.
This is a guest post by Kylie Greeff of whitelabelcrowd.fund
As one of the first countries in Asia to publish a regulatory regime, Malaysia is opening up to entrepreneurs, institutions and global operators to facilitate the ease of business credit through P2P lending. Ranked 18th on the World Banksâ€™ Ease of Doing Business league tables, Malaysia is positioning itself as the conduit for global players to setup in Kuala Lumpur as gateway for serving P2P lending markets across Asia. Malaysia has one of the highest levels of financial inclusion in the world at 92 per cent and the country has taken advantage of mobile phones and online banking to expand access. The recently published Securities Commissions (SC) of Malaysiaâ€™s rules on the operation of a Peer-to-Peer platform sets out the minimum requirements for the compliant operation of a Loan based crowdfunding platform in Malaysia.
Given the recent publication of the SCâ€™s rules, we have undertaken a comparison of the regulatory requirements imposed on Malaysian P2P platforms with their UK counter parts. The comparison highlights a number of differences first both in the rules that must be followed to operative a platform as well as the minimum standards imposed on operators operating the platforms in Malaysia. Whilst the comparison identifies a number of differences between the two bodies of regulation, this is not unexpected give the differences in maturity of the two markets. P2P in its earliest form began in 2005 in the UK, with the UK regulator announcing its intention to regulate the sector in 2013. The UKâ€™s early P2P regulations were very similar to those now produced by the SC.
The SC in their production of their regulations have clearly done their research into the rules implemented by many platforms and regulators around the world in helping them draft their first guidelines, and have arguably used the UKâ€™s regulations as their closest reference. A strategy that appears to have been widely adopted in their regulation of other financial markets as well. Below is a more detailed review of the UK and Malaysian regulation.
The first noticeable difference in the platform operator rules is the requirements by the SC for a platform to have a minimum paid-up capital of RM5 million (approx. Â£80,000). The UK regulatory body the Financial Conduct Authority (FCA) does not impose a minimum capital requirement for the start-up of a platform. The FCA instead imposes a capital adequacy Requirement (CAR) on platforms once they are trading and authorised by the regulator. A platformâ€™s CAR requirement is based on the trading performance of the platform weighed against its loan book. The SCâ€™s decision to incorporate a minimum capital level on start-up platforms could be seen as a possible reaction to the recent debate in the UK and USA about the possible implementation of Capital requirements on P2P platforms similar to those currently applicable to banks. This being said, the requirement of RM 5m is not prohibitively high and may not be seen by many market entrants as a particularly high barrier to entry, particularly by those supported by financial institutions familiar with far more prohibitive capital requirements.
Whilst the FCA does not have a start-up paid up capital requirement, recent feeling and expectation in the UK is that the FCA will potentially move to more onerous Capital Requirements similar to those imposed on many other financial institutions.
Investor Communication and Transparency
It is interesting to note that the SC has decided to enforce a specific requirement on P2P operators to use â€˜an efficient and transparent risk scoring systemâ€™ and to â€˜carry out a risk assessment on issuersâ€™. The FCA imposes no such requirement on platforms, although the majority of platforms do incorporate a risk rating identification system for the benefit of lenders, the platforms do not openly publish their system or processes as these are closely guarded as valuable IP of the platforms. In the absence of a specific requirement to have an â€˜efficient and clear risk scoring systemâ€™ the FCA would expect platforms to assess their market and client needs and ensure that they operate with in the FCAâ€™s Principles for Business (PRIN), most notably in regard to risk modelling, Principles 5,7 and 9. Itâ€™s worth noting here that the SC operate similar principles in terms of Fund Management Companies, see Guidelines On Compliance Function For Fund Management Companies.
The language used by the SC of â€˜efficient and transparentâ€™ is surprisingly vague and may be intentionally left as such to allow platforms the space to develop naturally allowing the SC room to review practices and later set what they deem to be appropriate transparent and efficient processes.
In its list of Operator Obligations, the SC appears intent on ensuring that the platform operators acknowledge and respond to the need to maintain transparency between the investors and the Issuers and to make investors aware of the nature of their investment. This can be seen in rules 13.05 (d-f). Interestingly rule 13.05 (d) requires operators to â€˜carry out investor education programmesâ€™. The FCA again poses no requirement on platforms to â€˜educateâ€™ their investors but it does impose standards of disclosure and business conduct in its Handbook. The FCA expects platforms to take measures to ensure that they are open and transparent about the nature of the investment products it offers and that information is clearly displayed and prominent for investors (COBS 2.2.1 and 2.2.2).
Carrying out educational programmes in the form of videoâ€™s and blog post as well as informative events are a good way to encourage a higher level of customer engagement, but also goes a long way to building the trust of investors in the platform. Rebuildingsociety.com has benefited greatly from publishing a number of blogs about its journey, the types of investment it offers, the internal processes it uses to ensure the efficient and safe operation of the platform. Transparency is greatly valued by both the investors and the regulators.
Anti-Money Laundering and Financial Crime Prevention
As expected, the SC has incorporated the need and responsibility of platforms to ensure that they carry out sufficient Anti Money Laundering (AML) and Financial Crime (FC) Prevention practices as part of their normal operating processes. AML and FC are increasingly sensitive areas. Whilst the SCâ€™s Guidelines on Recognized Markets does not set out specific instructions and guidance on the expected processes and levels of due diligence required by platforms, platforms should look to the SCâ€™s â€˜Guidelines On Prevention Of Money Laundering And Terrorism Financing For Capital Market Intermediariesâ€™ which was developed from Section 83 and section 66E of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLATFA) and section 377 of the Capital Markets and Services Act 2007 (CMSA). This document sets out the SCâ€™s expectations of platforms in relation to AML and FC prevention.
The SCâ€™s guidelines on AML and FC prevention are broadly similar to those of the FCA set out in SYSC 6.3, in that advocate a risk based, profiling approach to AML and FC prevention processes and require firms to incorporate enhanced Due Diligence practices where individuals are profiled to be higher risk. Continue reading →