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Advising on P2P Agreements

15th December 2016

FCA Permission: Advising on P2P Agreements

On the 6th April 2016, firms that held the permission for the regulated activity of ‘advising on investments’ automatically had an additional activity added to their permissions, viewable on the Financial Services Register. This new automatic permission was for ‘advising on peer-to-peer (P2P) agreements’.

This included both firms that hold the permission, but for whom providing advice is not their primary business, (for example general insurance intermediaries) and firms that hold the ‘advising on investments activity in respect of non-investment insurance contracts.’

Whilst this permission was automatically added to these firms, should a firm not require this additional permission, they have until 31st December 2016 to remove it using the FCA’s short variation of permission form. Once received, the FCA will expect that the additional permission would be removed within 3 weeks.

After this date, those firms wishing to remove this additional permission must use the standard Variation of Permission (VoP) application form found within the FCA’s Connect system.

However, firms should that note once this permission has been removed, should they wish to re-add Advising on P2P Agreements to their permissions, then they would need to complete FCA Connect’s standard VoP application. – And the cost for most firms to add this back on would be £250.

Background to Advising on P2P Agreements

Back in 2014, the government announced the introduction of the Innovative Finance ISA - the IFISA for short. The IFISA would allow for Peer-to-Peer (P2P) lending agreements to be included within an ISA tax wrapper.

Additionally at this time, ‘advising on P2P agreements’ would become a new regulated activity.

Cost of Advising on P2P Agreements

Firms that have automatically received the new permission will not have to pay additional FCA regulatory fees just for holding the P2P advice permission.

However, if the firm earns income from this new business, then the same approach is taken as for all other types of investment business.

Additionally, firms who do not undertake designated investment business will be subject to an additional fee with regards to the Financial Ombudsman Service (FOS). This is currently expected to be £45 and will not be charged until the next financial year (2017/18).

Regulatory Reporting for Advising on P2P Agreements

The FCA anticipates that there will be no additional reporting requirements at this time and remind firms that any income earned from the new permission should be included within their investment income.

Other Regulatory Requirements

On their website, the FCA stress to Firms with the new permission of Advising on P2P Agreements that they must, among other things, ensure that reasonable steps are taken assess that personal recommendations are suitable for their clients.

The FCA’s Policy Statement from March 2016 (PS16/8) that related to the segregation of client money on loan-based crowdfunding platforms, the IFISA and the regulated activity of advising on P2P agreements, also extended this requirement to personal recommendations with regards to P2P agreements from 6th April 2016.

More information on assessing suitability can be found in COBS 9 of the FCA Handbook.

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