Peer-to-peer Lending Compliance

[dmcniven]

I am looking to shed some light on the facts surrounding this and in-particular the involvement of the FCA and what criteria's must be met (if any) by this example below;

Property development company sources, negotiates and purchases a property with the end goal to resell the property (that has now been refurbished and developed) around 6 months after the initial purchase.

Property development company requires say £100,000 to help fund the purchase and the development costs. The company reaches out to its pool of casual investors and offers 10% return on any amount they input upto a maximum of £100,000. This can be made up of 1 single investor at £100,000 or a number of investors (10 at £10,000 each). All going to plan they will all benefit from a fixed % interest rate plus their initial investment amount when the property eventually sells.

I understand there is many different types of regulation required. I also understand that it is very easy for me to download apps like eToro and instantly start investing thousands on the stock exchange or cryptocurrencies without anyone questioning me or the platform.

My questions are as follows;

1. Does the company in question have to be compliant with any UK regulatory body?
2. Without regularisation is the company actually acting illegally?
3. Is it really a high risk investment when compared with other investment opportunities available for the same return?

Thank you in advance for any information on this matter.

 

[Mark T Jones]

1. To go to the broader public with such an offer they would need to be FCA authorised

2. Yes - subject to above. You’d probably need to seek out the definition/rules around sophisticated investors


3. Impossible to say without far more information

additionally, the FCA are going to be looking closely at P 2 P following some high profile failures.

 

[dmcniven]

1. To go to the broader public with such an offer they would need to be FCA authorised

2. Yes - subject to above. You’d probably need to seek out the definition/rules around sophisticated investors


3. Impossible to say without far more information

additionally, the FCA are going to be looking closely at P 2 P following some high profile failures.

Thanks Mark for taking your time to answer.

Based on your answers, would I be correct to assume that should you not market such offering to the 'broader public' then you are not breaking any regulatory rules in that respect. Of course there is other compliance issues such as KYC and AML checks to be considered within the investment itself, but in terms of a pool of investors who seek such opportunity then, providing it hasn't been marketed in a retail form, then all is okay and no rules are being broken?

 

[Mark T Jones]

Thanks Mark for taking your time to answer.

Based on your answers, would I be correct to assume that should you not market such offering to the 'broader public' then you are not breaking any regulatory rules in that respect. Of course there is other compliance issues such as KYC and AML checks to be considered within the investment itself, but in terms of a pool of investors who seek such opportunity then, providing it hasn't been marketed in a retail form, then all is okay and no rules are being broken?

My understanding is that you can make a private offer to sophisticated investors

I would however verify this with FCA