Investor limits and other new requirements to enhance investor protection in the peer-to-peer (P2P) financing market are being adopted by regulators in the U.K.
The Financial Conduct Authority (FCA) has announced new rules designed to prevent investor harm, without stifling innovation, in the emerging P2P sector (including loan and investment-based crowdfunding platforms).
“These new rules are designed to help better protect investors and allow firms and fundraisers to operate in a long-term, sustainable manner,” the FCA said.
Under the rules, retail investors will be limited to risking 10% of investable assets, unless they receive regulated financial advice. Investors who don’t get advice will also be subject to KYC requirements.
The rules also impose disclosure requirements on P2P platforms; establish governance, systems and controls requirements for platforms; and strengthen the rules on arrangements for winding down failed P2P platforms.
“These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities. For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection,” Christopher Woolard, executive director of strategy and competition at the FCA, said in a statement.