News Briefing - Crowdfunding, SME And Alternative Finance

A horse race, where you best on one horse to win.

1.UK – P2P

Many sources are reporting on the collapse of mini-bonds provider London Capital & Finance (LCF)

On Saturday, The Times carried a first person 'don't make the same mistake I made" story from an investor, and the Sunday Times followed up with a warning about chasing high interest rates, and being misled by fake comparison sites. (subscription required).

Professional Adviser reports that four people have already been arrested as the Serious Fraud Office (SFO) investigates the firm's collapse and its 'Misleading, unclear, unfair' promotions.

The Evening Standard reports another row has erupted over the firm's 'only promising investment.'

Finance Feeds focuses on the government's response, including from the Treasury Select Committee.

2. UK – P2P

 

AltFi News carries commentary from Orca Money on the problems of mini-bonds.

 

“Peer-to-peer aggregator Orca Money has called out the “perils” of mini-bonds in the wake of a fraud investigation into the collapse of mini-bond provider London Capital & Finance (LCF).

Some 11,600 bondholders, attracted by LCF’s high interest rate and supposed ISA eligibility, are now facing collective losses of £236m as administrators scramble to recover debts.

“The high-profile collapse... highlights the perils of solely chasing an interest rate,” said Orca CEO Iain Niblock yesterday.

“This is a horrible situation for the savers and investors who were duped into a highly attractive interest rate.”

At its peak LCF lured investors with promised interest of 9% a year, some of which was marketed as a “fixed-rate ISA”, but which it later transpired could not be wrapped in an ISA.

“Mini-bonds are unlisted, unregulated debt securities. They are non-transferable and illiquid. Supporters highlight that they give investors a cheaper way of accessing corporate debt than through retail bonds,” said Niblock.

“But if investors want exposure to non-listed credit investments, P2P platforms are more heavily regulated and have stricter controls on what they can do with the money.

In the wake of its collapse many investors were shocked to discover that mini-bonds aren’t covered by the Financial Services Compensation Scheme (FSCS), so investors cannot claim their money back via the guarantee, nor are they regulated by the FCA (although their marketing is reguated).

“Critics often focus on P2P lending being risky, but mini-bonds such as these seem to get an easier time, despite several high-profile failures in recent years such as Secured Energy Bonds and Providence Bonds, worth £7.5m and £8.15m respectively."

 

3. UK – P2P/IFISA

 

P2P Finance News reports:

 

“ALMOST half of Assetz Capital investors are planning to put the majority of their ISA money into its Innovative Finance ISA (IFISA).

The peer-to-peer business lender’s first-quarter investor barometer found 48 per cent were allocating most of their IFISA funds to the platform’s tax wrapper.

Just eight per cent confirmed they would be investing in cash ISAs, with a quarter planning to opt for stocks and shares ISAs.”

4. UK – AltFi

 

FT Adviser reports:

Continued consolidation in the adviser market could lead to the fund space being reduced to a small number of "mediocre" providers, Hargreaves Lansdown founder Peter Hargreaves has warned.

5. US – FinTech.

Crowdfund Insider reports on the path to stability in the ICO sector.

“For the third time since November 2018, on February 20, 2019, the SEC issued a cease and desist order relating to an initial coin offering (ICO) which set forth the steps for remediation of an unregistered securities offering, this time for Gladius Network, LLC (the “Gladius Order”).

Like the prior two decisions, Airfox and Paragon Coin, among other things, the SEC required the issuer to register the unregistered securities as securities and required notice of, and an offer of rescission to, its purchasers. But—unlike the Paragon and Airfox orders—Gladius was not fined.

Collectively, these cease and desist orders are important because they set out what many Fintech regulatory lawyers and others, have requested—a path for ICO remediation.

The path is now clear:  comply with SEC reporting requirements, offer a right of rescission to the investors, notify the investors, and pay a fine, unless of course, you follow Gladius’ lead and directly approach the SEC.

As a direct result of Gladius’ initiative, and unlike the Paragon and Airfox orders – no fine was issued to Gladius.”


6. International – P2P

 

Bloomberg reports on the problems in China.

“China has discovered predatory online cash loans, and even an appearance on the state broadcaster’s annual consumer rights program is unlikely to eradicate the practice.

In its two-hour special on March 15, China Central Television interviewed a woman whose debt ballooned to 500,000 yuan ($74,417) in just three months, from an initial 7,000 yuan. She was lured into taking out a “714 missile” loan, so-called because they’re typically due in seven or 14 days.”