Peer to peer lending involves the provision of a facility,
usually online, by an intermediary. The facility is used to offer
of debt securities (or loans) principally to match lenders
(investors) with borrowers (issuers) who are seeking loans for
personal, charitable or small business purposes. The provider must
ensure that a borrower does not use the service to raise more than
$2 million in any 12 month period.
Under the Regulations, peer to peer providers are required to
a disclosure statement outlining the type of service, how
investors money is received and dealt with, the type and extent of
the checks and assessments completed on borrowers (issuers) and the
risks involved and fees payable
a client agreement to be entered into by investors which is
required to outline how the provider will monitor compliance by the
issue with its repayment obligations.
The Regulations impose a number of criteria on providers
having systems and processes to assess the risk that a borrower
will not repay lending and the disclosure of that information to
implementation of a 'fair dealing policy' to exclude
any borrowers from using the peer to peer lending service if the
provider has a reason to believe the borrower has engaged in
misleading or deceptive conduct, or made a false, misleading or
unsubstantiated representation in contravention of the FMC
Markets Authority has further information available on its
site, including information about the risks of peer to peer
FMC Act – Next Steps
Consultation on three exposure drafts of phase 2 of the FMC
Regulations has been completed and it is anticipated that the full
set will be released in October 2014, with the FMC Act coming into
full force on 1 December 2014.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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