Peer-to-peer lending platform and client Rebuildingsociety has called on the Financial Conduct Authority (FCA) to work with itself and other clients amid a crackdown on Designated Representatives (AR) authorizations.
Earlier this month, the City Watchdog proposed stricter rules for overseeing ARs after seeing a “wide range of harms” and “real risks of consumers being misled and mis-sold”.
Rebuildingsociety’s ARs will no longer be able to provide new loans since February 26, 2021, after the FCA raised concerns about the AR/main structure for P2P platforms.
The director of Rebuilding Society, Daniel Rajkumar, told Peer2Peer Finance News that the FCA approached them asking them to check everything with its ARs and requested that the principal impose a borrowing restriction on its ARs while it conducted its investigation.
Rajkumar said he hopes the ban will be lifted after consultations with ARs and principals are completed, and once the FCA has reviewed evidence that Rebuildingsociety has all appropriate resources in place.
Rajkumar said more awareness of the main body is needed, and called on the FCA to work with them and other main platforms. He added that a trade organization for clients would also be helpful.
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“We hope that when the results of the consultation are known, the FCA will recognize that the principal/AR model is an appropriate way to oversee innovative financial services,” he said.
“Acting as a client should, in my opinion, be permission in itself. At the moment, anyone who is authorized can become a client, but there is still a lot of work to be done to manage and control risks and control ARs.
“We are aware that the regulator is concerned about clients and AR companies are getting more complaints, but in a sense they are taking full responsibility and have good control over behavior and governance. In my view, it could be a way to expand regulation in an operational way for innovative financial services.
“If the regulator can work with industry to recognize that this is an extension of regulation and can work well, especially around innovative financial services where it’s very highly skilled and fast and can be demanding, I think it can work very well.” .”
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“There could also be a trade association for the key companies,” he added. “This is not something the regulator can necessarily do, but it could be an important founder of such an association where they promote some amount of industry cooperation.
“Especially given the current skills shortage at the FCA and they have acknowledged that they have a shortage of skilled personnel with experience dealing with fintech, this is an opportunity for the FCA to work with industry to oversee the sector to ease.”
Rajkumar added that he wants the FCA to remove P2P from its list of risky investments, a concern many platforms have expressed.
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“The FCA tends to list innovative financial services that are not progressive mainstream,” he said.
“If you want a progressive regulatory system you have to work together more. I don’t think there’s an appropriate amount of accountability with regulation at the FCA.”