Leading Peer to Peer lending property specialist, Sourced Capital, looks at the recent regulatory changes to the P2P sector and answer some of the most common questions surrounding them received by those investing via their platform.
The new FCA regulations
At the end of last year (Monday 9th December), a new set of FCA Regulations were introduced to for Peer to Peer lending platforms, requiring a far more robust accreditation process for those looking to invest.
These stricter onboarding measures have been widely welcomed by the industry as it enhances the sector for investors from a quality control standpoint and ensures they are receiving the right level of security and protection, a positive for P2P lending industry as a whole.
In anticipation of these changes, Sourced Capital has recently invested in a brand new tech platform that provides a simple and easy user experience for investors, allowing them to transfer their ISA online and use it to invest in property instantly with e-wallet control on its integrated dashboard. Investors can also invest with their SIPP or SSAS pension, or regularly with cash.
Stephen Moss, founder and MD of Sourced Capital, commented: “The end of last year saw the introduction of some long overdue and very welcome changes which can only better the sector as a whole and make it a safer, easier environment for investors and lenders alike.
Anything that encourages proper practice, transparency and a level playing field for all can only be a good thing, but while these changes are for the better, we’ve still seen a large degree of investors remain unaware of their implementation and what it means for them.
While the Peer to Peer sector offers a great opportunity for many of us to become ‘armchair property developers and investors’ with the advent of technology making this process even easier, it’s important that the standards required are maintained regardless of how involved you choose to be when investing.”
Below are just a few of the questions received by the team at Sourced Capital and the answers.
Why do platforms now require an appropriateness test?
The appropriateness test is to ensure investors understand the structure and risks included with this type of investment and how investment monies are used once deposited.
What happens to my active investments I have already made?
All investments which are already active will not be affected by the changes and will remain as they were before.
What happens if I wish to make a new investment?
You will have to complete a simple test to confirm you understand the nature of P2P investing before you are allowed to do so.
I am asked to classify myself as an investor, why is this?
Additional regulations have been placed to restrict marketing activities to protect less-experienced investors during their decision making processes. These changes are to safeguard you and are nothing to worry about.
What else has changed?
A number of changes have been brought into place including the strengthening of wind-down plans for P2P Platforms and minimum requirement levels of information being provided to investors to ensure a higher level of education and transparency within the sector to aid more informed choices when investing.
How will the information provided to me change?
P2P platforms are now required to set out a minimum level of information including statistics on past performance and transparency on the fees charged to borrowers, to allow investors to make a fully informed investment decision.
I have not invested in P2P before, can I still invest?
Yes, people new to P2P investing can still invest. The regulation changes simply aim to aid investors in having a detailed knowledge of the structure prior to putting in any capital.
What if I fail the appropriateness test?
All platforms will have a different process for this, however, the platform will likely reach out to you to discuss the points you failed on, in order to assist in providing the knowledge required to invest in P2P. Failure certainly doesn’t mean you can’t invest, just that we want to make you more aware of the sector and the implications of investing before you do.
Who are Sourced Capital?
Sourced Capital is part of the Sourced.co Group – innovative property development investment solutions through technology utilising ISA and Pension (SIPP/SSAS) opportunities to maximise returns and minimise taxation. All via an established and trusted team of property professionals with millions of pounds in deals done and exited.
With Sourced, you can invest as little as £250 and with returns that yield up to 12% per annum and invest up to £20,000 tax-free per year (ISA), safe in the knowledge that your investment is secured on the land that is being developed and on the resulting uplift in value. Sourced also lets your pension work harder for you and ensures flexibility in terms of where your money is invested. Again, all secured.
See Steve Moss, Founder and CEO, talking about how this works here
Sourced Capital also use regtech processes such as an anti-money laundering check (AMC) and know your customer (KYC) identification checks. The AMC and KYC checks are in place to verify the identity of individuals carrying out financial transactions and screen them against global watchlists.