In chartered territory
The new FCA recommendations underline the importance of financial expertise in P2P lending, says Neil Maurice, chief finance and operations officer of Loanpad.
proposals from the Financial Conduct Authority (FCA) will soon require all P2P platforms to introduce appropriateness tests and strengthen or reconfigure their wind-down plans.
As a chartered accountant, Neil Maurice understands this new regulatory universe better than most. Before becoming chief finance and operations officer at P2P platform Loanpad, he was a director at BDO and Duff & Phelps specialising in financial services.
“I spent a number of years undertaking some high-profile investigations on behalf of the FCA into specific areas such as client money, mis-selling, compliance, governance and systems and controls,” says Maurice. “What I learned was that a good financial services business focuses on three very fundamental items: policy, process and people. If you can get those three items right, then you should be a long way towards meeting regulatory expectations.”
Maurice joined Loanpad in January 2018, when the FCA was concluding its post-implementation review of the P2P and crowdfunding sector before its consultation on the proposed new rules in July 2018. “For me, joining Loanpad was about creating a simple and transparent platform that offers investors an innovative way to invest in P2P lending whilst being aware of and managing risk to the lowest extent possible,” he says. “I think we’re now entering a period where everyone is realising that regulation is critical if not core to a P2P business.”
However, Maurice adds that P2P is unique in the sense that some people came into the sector with “little or no experience in being part of or running a regulated business.” This may cause problems for some platforms as compliance and regulation continue to take centre stage. So how does Maurice feel about the new FCA regulations?
“I believe very strongly that they already reflect what is good practice in any regulated firm, and certainly in the P2P lending market,” he says. “The FCA had a difficult job in trying to strike a balance between protecting consumers on the one hand whilst also allowing the P2P sector to thrive.
“I very much welcome the heightened focus on wind-down plans,” he adds. “As a sector we are trusted to hold and protect client money so we have to plan appropriately for the worst-case scenario. We have to be able to wind down a loan book in a calm and efficient manner.”
Maurice says that over the coming months, Loanpad will be reviewing the platform’s systems and processes to ensure that they meet regulatory expectations, and he is sure that other P2P lenders will be doing the same.
“If done properly, the implementation of these rules will allow investors to properly compare the risk levels for each P2P lending firm so they can choose the products that are appropriate for them,” says Maurice. “Our focus is on compliance and transparency with investors. We certainly want to feel that our investor base understands what they’re putting our money into.
“Ultimately, I think the new rules will be a positive for platforms as investors will understand the products offered and can adequately compare and contrast different platforms.”