UK: A New Regulatory Regime For Peer-To-Peer Lending

In June, the FCA published its policy statement on crowdfunding platforms ( PS19/14). PS19/14 contains two new sets of rules which apply to: (i) loan-based (P2P); and (ii) investment-based crowdfunding platforms.

Prior to this, P2P and investment-based crowdfunding platforms were already subject to the FCA’s High Level Standards, such as the Principles for Business. However, as the evolution of the two types of investment has differed, so has the regulation around them. Investment-based crowdfunding platforms were already subject to detailed regulatory obligations. The changes introduced by the new rules extend the application of the marketing restrictions which applied to investment-based crowdfunding platforms to the P2P sector, bringing standards around disclosure and provision of information in line. This addresses some of the complexities of the P2P sector, and brings the regulatory regime more in line with that of investment-based crowdfunding. With the creation of two distinct regimes, the FCA has taken a different approach to the one contemplated by the European Commission’s proposal on crowdfunding, which proposes a single regulatory framework. This blog post focuses on the most significant of the new rules for P2P platforms.

The majority of these rules will come into force around the same time that the Senior Managers and Certification Regime (SM&CR) will apply to solo-regulated firms. Therefore, firms will need to grapple with addressing internal practices in order to comply with both.

Marketing restrictions and appropriateness assessments

The FCA has decided to limit P2P platforms’ ability to market to certain investors. Significantly, P2P platforms that communicate direct offer financial promotions will be restricted to communicating only with retail investors who have certified that they will not invest more than 10% of their investible portfolio in P2P agreements (unless they are certified as a sophisticated investor or as high net worth). The 10% cap is aligned with the current restriction in respect of non-readily realisable securities (NRRS). The introduction of this 10% cap could have significant impact on businesses whose platform focuses on retail investors. Therefore, P2P firms will need to consider how to implement these changes and monitor ongoing compliance with the 10% cap while not appearing off-putting to investors.

Risk management

The new rules require appropriate arrangements to be in place for the effective setting of the price of the P2P agreement. The rules are focused around structuring the relationship with the borrower in accordance with an assessment of their credit risk. The move away from relying on investors to make this assessment themselves will increase the responsibility and potential liability of the platforms.


In addition to the governance arrangements already required, firms will need to put in place adequate risk management policies. Firms will also be required to have independent functions in the following areas: (i) risk management; (ii) internal audit; and (iii) compliance, where it is proportionate to do so based on the nature of the business, its scale and complexity. Where independent risk management and internal audit functions are appropriate, individual responsibility for these must be assigned at a senior level, which presents an opportunity for firms to consider the new rules alongside their preparations for implementing the SM&CR.

Firms will be expected to apply their judgement as to whether these requirements apply to them. It will be worth firms documenting their assessments of above in case of a challenge from the regulator regarding compliance, as well as reviewing their approaches to assessment and compliance as the platform grows.

Wind-down arrangements

The FCA has clarified the rules in relation to wind-down of P2P platforms following Lendy’s high-profile collapse, introducing changes on the basis that a disorderly wind-down could cause considerable harm to investors. This includes an obligation to notify lenders. The aim of this is to ensure that, in the event that a platform ceases to perform its operations, agreements they facilitate would have a reasonable likelihood of being managed on an ongoing basis and in accordance with the contract terms. The need to have sufficient funding to cover the cost of administering the wind-down imposes further requirements on these platforms.

A ‘Dear CEO’ letter from the FCA in March of this year identified certain areas requiring urgent attention to mitigate some below par standards the FCA recently observed. This requires platforms to review whether a firm’s wind-down plans are adequate and effective; that they are suitably developed and reviewed; and to ensure that a platform would know when to invoke their wind-down plan. It also includes other considerations on wind-down such as tax status, arrangements for client money and IT system continuity.

The FCA’s particular focus on this area will exacerbate the pressure on firms to ensure they are implementing the guidelines effectively.

Disclosure requirements

The FCA is also imposing detailed disclosure requirements to ensure investors have the necessary information to enable them to make informed decisions. Firms will need to change current practices to ensure that they provide investors with the correct information at the pre-investment stage, at the outset of the arrangement and on an ongoing basis. The disclosure requirements focus on providing information on:

  • The role of the platform, for example by providing a description of how loan risk is assessed;
  • Details of the platform’s wind-down arrangements, making it clear that in the event of a platform’s failure, the P2P agreements may cease to be managed and administered; and
  • Investment information, including more transparent information on the platform’s fees for services provided.

The ongoing disclosure requirements in particular are likely to prove burdensome for firms.


P2P platforms have until 9 December 2019 to comply with the changes that the FCA has introduced. In issuing the policy statement, the FCA is aiming to address areas of poor practice by establishing additional measures to protect consumers, whilst allowing the P2P sector to grow without stifling competition. Of the changes to come into force, it seems the most difficulty may arise from the enforcement of the 10% cap on retail investors’ investible portfolio. For example, firms will need to think about their assessment of how investors declare assets.

The FCA has aligned the deadline for compliance with the introduction of the new SM&CR rules, and firms will be expected to use their judgement regarding whether new requirements apply to them. The introduction of these changes in conjunction with the new SM&CR rules could place substantial pressure on firms. However, firms could use this as an opportunity to address many of their relevant practices, and where applicable, ensure compliance with both sets of new requirements at once.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions