As with other investments subject to these rules, advisers would need to have a charging model for advice to invest that does not rely on the payment of commission. The rule changes would also prevent the payment of commission to platforms such as those run by self-invested personal pension scheme operators.
The regulator will introduce new guidance and rule changes on disclosure and advice relating to P2P agreements when the Innovative Finance ISA launches in April next year.
The new guidance will impact all firms involved in selling loan-based crowdfunding investments in an IFISA wrapper, including advisers, ISA managers, firms running loan-based crowdfunding platforms or other firms that distribute IFISAs to investors.
The Innovative Finance ISA allows peer-to-peer agreements to be included within an ISA tax wrapper, and advising on P2P agreements will become a regulated activity from April.
As a result of the introduction of this new regulated activity, the FCA is considering whether its rules on the suitability of advice should apply to firms giving advice on P2P agreements. If the FCA decides to apply these rules in relation to P2P agreements, advisers would need to ensure that they take reasonable steps to make sure that personal recommendations are suitable for their clients.
The FCA will also considering whether prospective investors in IFISAs should be given information on what the tax consequences are if the P2P agreement is not repaid, the tax consequences arising from an investor wishing to withdraw a P2P agreement from an IFISA, and the procedure for switching ISA manager.
In addition, if P2P platforms with ‘interim permission’ are able to offer IFISAs or become ISA managers, the FCA will consider whether further information should be disclosed to prospective investors outlining the risks.
When the FCA took over regulation of loan-based crowdfunding in April 2014, firms operating P2P platforms that had previously held an Office of Fair Trading licence were able to register for an interim permission from the FCA to continue conducting this regulated activity from April 2014. Having an interim permission ensures firms can remain in the loan-based crowdfunding market until their application for full authorisation is considered. Firms operating P2P platforms were required to submit their application for full authorisation by the end of October, and the FCA has said it will take between six and 12 months to consider an application.
