Industry regulators are never going to come out top in the popularity stakes, but the Financial Regulation Authority (FCA) looks to be on the receiving end of mounting criticism from a number of different sides. The Alternative Finance sector certainly feels it has good reason to gripe, with only an estimated ten P2P platforms passed fit for authorisation (out of 80+) and all the major heavyweights – Zopa, Funding Circle and RateSetter included – still waiting patiently in the queue for official blessing.
The frustration of the crowdfunders (as the FCA insists on calling everyone, regardless of whether the platforms are offering either equity or debt investments) has been well publicised, but there are other, arguably worse examples. Nick Pearson, CEO of Debt Councillors’ Charitable Trust, recently reported that it has been over two years since most of the UK’s commercial debt management companies (CDMCs) submitted applications for FCA authorisation. Without entering into the minutiae of that particular debate, it seems that, irrespective of the time taken to process submissions, the FCA stands accused of being less than helpful in terms of helping applicants to interpret the Consumer Credit Sourcebook. It follows that, if you don’t understand the rules as constituted by the FCA, it is unlikely you will ever know how to pass the test.
Elsewhere, ShareSoc, an organisation representing individuals who invest directly in the Stock Markets – as opposed to those who invest via pooled funds – has made a submission to the FCA arguing that financial markets are currently skewed in favour powerful institutions, particularly in the lucrative area of large share placings from which smaller shareholders are often excluded.
The Deputy Chairman of ShareSoc, Roger Lawson, commented that: “The trouble with the FCA is that, apart from taking so long to do things, they make the rules so complicated that they create extra work for everyone, including themselves. And the FCA has inadequate resources to do lots of things.”
I am not qualified to comment on the intricacies of these highly specialist markets, but there are parallels between these respective experiences, such as the inadequate feedback given to applicants to enable them to succeed.
For the FCA to make sure that the public is protected and that applications should not be rushed through simply for the sake of financial expediency is obviously right. But commercial advantage is undoubtedly being given to the few that have managed to pass successfully through the net and it difficult to see how the Government’s much-vaunted Innovative Finance ISA is ever going to get off the ground. Unfortunately, it is looking increasingly likely that the P2P sector will have to wait until summer when the FCA is due to unveil the new rules and the operators may finally be allowed to know where they stand.