Operating an electronic system in relation to lending is a regulated activity, and platforms that let people invest in shares or debentures are regulated too. Carrying on either without FCA authorisation breaches the general prohibition in section 19 of the Financial Services and Markets Act 2000 (FSMA). That is an offence under section 23: on indictment up to 2 years in prison or a fine, or both, and on summary conviction up to 6 months or a fine, or both.
The rules below are for loan-based platforms. An investment-based platform needs permission for the investment activities it carries on and follows the rules for those.
What is regulated
Apply for authorisation
Apply on the FCA's Connect system. Explain how you meet the threshold conditions and which prudential category you fall into. Show how your permissions match your business model and how you will safeguard client money. The FCA must decide a complete application within 6 months and an incomplete one within 12 months.
Hold enough capital
Limit how you promote to investors
Check each investor is suited to P2P
Protect client money
Plan for the platform failing
Take reasonable steps to make sure the loans you arranged would keep being managed on their contract terms if you stopped. The arrangements must not favour one class of customer. The FCA's guidance gives examples. One is an agreement with another authorised firm to take over the loan book. Another is holding collateral in a segregated account to cover the cost of winding it down.
You must tell lenders about the arrangements when you make them, or when a lender first lends through you if later, and again if they change. If another firm would take over, tell lenders who it is and how it would hold their money.
Keep a P2P resolution manual up to date. It explains how you run the business and what an insolvency practitioner would need to keep it going. It covers critical staff and premises, IT and data recovery, records, bank accounts and payment facilities, outsourced providers, key contracts, your group structure and how you manage loan security. Keep it immediately available to an insolvency practitioner and to the FCA. Store it with your client asset resolution pack if you have one.
Publish an outcomes statement
Legal basis
Primary legislation and key regulations