News Briefing - Crowdfunding, SME And Alternative Finance

pied piper followed by children

1.UK – P2P/Real Estate

Money Week looks at investing in property via P2P, and examines how P2P platforms will fare in an economic downturn.

“P2P platforms have yet to experience a severe downturn, while they’re also not covered by the Financial Services Compensation Scheme (FSCS).

There are already signs that the market is getting tougher. Demand for loans has fallen. At the end of May, property platform Lendy went into administration. This left more than 20,000 of Lendy’s individual investors exploring legal action to recover the £165m plus they had invested. A catalogue of errors may lie behind Lendy’s spiral into administration, but the Financial Conduct Authority (FCA), the City regulator, is keen to ensure that investors don’t fall victim to the overambitious marketing claims of P2P lenders.

It is also introducing a cap on the amount they can allocate to P2P arrangements. To avoid overexposure to risk, this is set at 10% of investable assets where the investor hasn’t taken financial advice. Platforms will also have to “assess investors’ knowledge and experience”, says the FCA.”

2. UK – AltFi

Professional Adviser runs comment on “grey areas” in illiquid investments.

“Ian Sayers, chief executive of the Association of Investment Companies, recently wrote to Nicky Morgan MP, chair of the House of Commons Treasury Select Committee, arguing that "long-term lessons must be learnt to limit the damage when open-ended funds invest in illiquid, hard-to-sell assets", which, in the case of Woodford, meant unlisted stocks.

Sayers argues that, despite repeated warnings, "the FCA is still failing to address these fundamental questions". Questions around how such harm can be prevented from occurring before the fact, and how the regulator should be moving to take steps to protect the wider financial system are being raised.

As is so often the case in such high-profile events, there might well be a feeling the barn door is being closed sometime after the horse has bolted, but there clearly needs to be more education, information and protection in place to ensure that investors are 100% clear about the funds they are invested in and what those funds contain.

Therefore, perhaps consideration should be given for clearly defining to clients which of their assets are liquid and which are not?”

3. UK – SMEs/AltFi

P2P Finance News reports:

“MORE than a third of small- and medium-sized enterprises (SMEs) are unaware of the risk of losing their home for a business loan.

A poll by Purbeck Insurance Services has found that 39 per cent of business owners are unaware that their personal assets such as their home and life savings could be at risk if they signed a personal guarantee to secure finance for their business.

The research found 32 per cent of SMEs turning over more than £1m a year were required to sign a personal guarantee as condition of a finance deal.”

4. International – FinTech

TheNextWeb reports that just 20 per cent of “rich” millennials are investing in cryptocurrencies.

5. International – FinTech

Yet more fallout from the proposed arrival of Facebook’s digital currency, Libra.

“David Marcus, a former PayPal executive now leading Facebook’s cryptocurrency project, Libra, has claimed on Twitter that the company’s proposed in-app global payments network will not threaten the monetary sovereignty of nations.

The tweet was met with some skepticism, however.

Regulators around the world have been in an uproar since Libra was announced in June.

The Libra proposal immediately incurred flack from regulators in Europe, China, Australia and the United States, where Marcus was invited to testify before American Senate and House committees almost immediately.

Most recently, regulators in France and Germany condemned the project.

Many of the regulators have expressed concerns that the Libra currency network could be used by bad actors to circumvent global anti-money laundering and anti-terrorist finance controls.

All the regulators have warned that the Libra network could upset the global financial balance and interfere with the function of standard local currencies.”