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FCA tightening of P2P rules seen as ‘arbitrary’

6 June 2019

New rules from the Financial Conduct Authority to protect investors using peer-to-peer platforms, amid concerns of overexposure to the small but fast-growing sector, have been described as arbitrary and hard to enforce. 

From December, anyone wishing to invest in peer-to-peer will have to pass a test to show they understand the risks involved and new investors will be limited to placing 10% of their investable assets into P2P loans, unless they have received regulated financial advice.

Laura Suter, personal finance analyst at AJ Bell, described the tighter rules as a “blow” to P2P platforms.

She said: “Newcomers to the sector who haven’t sought financial advice won’t be able to invest more than 10% of their investible assets in peer-to-peer. The industry argued this limit is arbitrary and hard to enforce, but the regulator is pressing ahead regardless.

“It will be interesting to see how investors have to calculate and declare their investible assets to ensure they don’t exceed the cap. The flood of money to peer-to-peer in recent years has placed a spotlight on the sector, but it’s baffling that this limit is in place for peer-to-peer but not for other high-risk investment areas, such as cryptocurrencies, for example.”

The clampdown comes just weeks after the collapse of property-focused P2P site Lendy, which went into administration less than a year after it received full FCA authorisation.

Dr Roger Gewolb, founder of,  said he did not believe the FCA should be the regulatory body to take action with the P2P lending sector.

He commented: “It is disappointing that the new FCA rules appear to conflate P2P equity investments with P2P lending, as we should perhaps be less concerned with P2P equity investors no doubt better understanding the risks involved when injecting capital into these businesses.

“Borrowers, on the other hand, are still not fully equipped with all the facts to understand how little protection they have when borrowing from a P2P lender. They are also not in a position to properly and professionally access the information on loan portfolios and their performance that is given to them by many of the P2P lending platforms.”

Gewolb argues the Bank of England should be regulating the P2P lending market and treating lenders the same as licenced deposit takers, warning that the new FCA rules appear to still leave the duty of care for creditworthiness and lending performance with the companies themselves, effectively “leaving the cowboys in charge of the ranch in some cases”.

However, Charlie Taylor, head of provider Octopus Choice, welcomed the FCA’s involvement, saying there were clear benefits to all for raising standards through tighter regulation.

“A healthy, well-regulated industry for P2P is beneficial to all stakeholders – investors, advisers, borrowers, platforms and the economy more broadly. P2P is a mechanism and investors need to make sure they choose a robust provider with a good track record.”

Taylor added: “In strengthening the regulatory rules to raise the standards of the industry, the FCA is helping the industry to mature and we welcome that development. We will continue to work proactively and collaboratively with the FCA and other platforms in the industry to increase the understanding of, trust in and access to P2P investment opportunities.”

Professional Paraplanner