Of Relevance to:
Firms advising on P2P agreements; all firms undertaking ‘advising on investments
Client Money: Loan-Based Crowdfunding
The proposed changes to CASS to allow firms to hold money in relation to both P2P agreements (CASS protection) and business to business agreements (falls outside of CASS protection) without breaching CASS came into force on 21 March 2016 – see Regulatory Roundup 72 for the background to this. Note that firms wishing to avail themselves of this provision must inform the FCA at least one month before adopting this Approach.
The final rules appear in policy statement PS16/8 (Appendix 2) which was published on 21 March.
Apart from including the above segregation of client money, PS16/8 also addresses changes to the Regulated Activities Order which will impact upon advisers.
The regulated activity of ‘advising on investments’ has been sub-divided so that advising on P2P agreements (“Article 36H agreements”) will be a separate regulated activity. The Training and Competence sourcebook (“TC”) will be amended so that advising on P2P agreements (for retail clients) will also be subject to TC. Although there is no qualification for this activity, such employees must be qualified to the same standard as if that employee were providing investment advice to retail clients on retail investment products.
Other parts of the Handbook that will be amended as a result of advising on P2P agreements being a separate regulated activity include COBS 6.1A (Adviser charging and remuneration), COBS 6.1B (operating an electronic system in relation to lending has been added to the charging and remuneration rules that currently apply to retail investment product providers and platform service providers) and COBS 9 (suitability); however affected firms should familiarise themselves with all the rule amendments set out in Appendix 1.
The rules in respect of P2P lending (Appendix 1) come into force 6 April 2016.