Did The FCA Turn The Regulatory Screw Too Tight?

Silhouette of human head screwed into clamp

Britain's peer-to-peer lenders have been forced to comply with a strict interpretation of the regulator's rule book, and a lot of good business has been squeezed out of the market, according to an industry expert .

According to the FT Adviser, the  regulated activity relating to loan-based crowdfunding is set out in article 36H of the Regulated Activities Order. 

Gillian Roche-Saunders, a compliance partner with law firm Bates Wells Braithwaite,  told the Adviser:

“When the Treasury drafted article 36H they were trying to regulate the P2P activity that already existed in the market. The FCA has taken a narrower view, and whether it’s due to unclear drafting or a confusing interpretation this means that P2P firms have had to jump through hoops. There has been a real difference in interpretation between the FCA and the Treasury."

This is interesting if true. We think the Financial Conduct Authority (FCA) has done a good job of supplying relevant regulation to protect investors and the public, while not burdening alternative platforms with high operating costs.

The idea of  "regulating activity that already existed in the market" makes sense to us. We'll be disappointed if platforms have been prevented from conducting business that the drafters of a regulation intended to be legal. But we're not sure about that "40 per cent" estimate. This is a topic on which we'd like to hear more voices speaking, from different points of view.