Funding Circle Holding Plc
Funding Circle (LSE: FCH) is a global SME loans platform, connecting SMEs who want to borrow with investors who want to lend in the UK, US, Germany and the Netherlands.
ID: 598139430310-16
Lobbying Activity
Meeting with Andrea Beltramello (Cabinet of Vice-President Valdis Dombrovskis), Elina Melngaile (Cabinet of Vice-President Valdis Dombrovskis)
24 May 2018 · Crowdfunding
Response to Legislative proposal for an EU framework on crowd and peer to peer finance
11 May 2018
Funding Circle is pleased to be able to submit a response to the Commission’s proposal concerning the European Crowdfunding Service Providers Regulation (“ECSPR”).
Please see the attached file, of which a summary is below.
We agree with the Commission’s analysis that pan-EU regulation of online lending platforms could significantly improve the financing situation of small and medium-sized enterprises (“SMEs”). In every market in which we operate, we have encountered the fact of SMEs underserved by traditional lenders; this trend is not diminishing.
We believe that properly framed EU wide regulation would help create a level playing field and allow platforms to expand their support for SMEs across the EU. For these reasons, we agree that EU-wide rules are indeed the next and vital step. A harmonised set of rules can help to ensure a robust and thriving sector for the benefit of both investors and SMEs.
In our assessment, however, the ECSPR in its current form will not find sufficient support from the online lending platform sector and does not provide adequate and effective retail investor protection.
We believe that the ECSPR could be a great success for all stakeholders if our concerns are addressed. This could be possible in the legislative proceedings, although we acknowledge the ambitious timeline. We are happy to work closely with the Commission, the Council, Parliamentarians and other stakeholders.
Our key areas of concern include:
1) The need to distinguish between equity and debt funding. As proposed, the ECSPR is, in certain key regards, unsuitable for debt funding. This is a missed opportunity and the ECSPR should differentiate between the two models.
2) The key investment information sheet (“KIIS”) cannot be reconciled with online lending platforms. Platform risk management, credit assessment, compliance and transparency around credit performance as a whole are stronger performance indicators to investors than “project” (loan-level) information.
3) Provisions relating to the KIIS and the secondary market have the effect of impeding useful product innovations that benefit investors. We know that diversification is the best method investors can use to mitigate credit risk, and the implementation of the KIIS would actually increase investor risk. A well-functioning and platform managed secondary market has much greater benefit to investors than the proposed “bulletin board”.
4) The ECSPR does not distinguish between retail and professional investors. It is important that a wide range of investors lend through online lending platforms - for example, both individual investors and institutional investors. Certain provisions of the ECSPR, such as the information requirements, are essentially retail investor protection rules and so this distinction should be made clear. Consumer protections should not apply to institutional investors.
5) Further provisions should be included in the interest of market integrity and consumer protection (such as in relation to risk management, credit analysis, anti-money laundering and counter-terrorism financing). Industry mandated risk warnings are not as effective as platform-specific risk warnings.
6) We are unclear how supervision by ESMA, and legal recourse to the ECJ, would work in practice given national regulatory oversight for lending and payment services. As such, we have concerns as to whether platforms will have operational and regulatory certainty, in addition to the higher compliance costs associated with double-regulatory oversight.
7) The regulatory implications for investors and SMEs need to be clarified. In certain member states, lending requires a banking licence and accepting a loan from a large group of people may qualify as deposit taking. We understand that any such licence requirements would not apply to investors or SMEs under the ECSPR, but this needs clarifying. A specific client assets regime should be considered.
Read full responseMeeting with Elina Melngaile (Cabinet of Vice-President Valdis Dombrovskis)
26 Feb 2018 · Fintech Action Plan & Crowdfunding platforms