P2P lenders could be in for further scrutiny from the Financial Conduct Authority (FCA) after the collapse of FundingSecure exposed client money failures, compliance experts have warned in a report by our friends at P2P Finance News.
At Money&Co. we had a routine audit with the FCA a few months ago – and passed with flying colours. However, our story is far from universal. See an extended excerpt from the story, below:
It was revealed last week that it was unclear who was owed what in FundingSecure’s client money accounts and now Duff & Phelps claims the City watchdog will use incoming regulations to ensure it can show its teeth.
Mark Turner, managing director of compliance and regulatory consulting at Duff & Phelps, said the introduction of new regulations for P2P lenders as well as the new Senior Managers and Certification Regime (SMCR), means there will be higher expectations for both firms and individuals.
“Quite clearly, recent headlines highlight some questions the P2P sector need to answer, and fast,” Turner said.
“The industry and the FCA are going to see increased pressure from the public as investors lose money and risk that faith in the industry is lost for good.
“From a regulatory angle, recent headlines will undoubtedly increase the urgency at which the FCA might take action in an attempt to prevent investors losing more money.”
Mar-Key 6, rated A+, is 30 per cent filled at the time of writing. The yield on offer is 7 percent. Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
Historical Performance And IFISA Process Guide
That figure is the result of over £19 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.