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Peer-to-Peer Lending: ASIC Provides Some Clarity on Regulation

Posted on March 23rd, 2016 by Sophie Gerber in AFSL Compliance

Peer-to-Peer LendingEntities providing marketplace lending should use the information sheet to help them understand current regulatory requirements.

ASIC released its guidance on marketplace lending (aka peer-to-peer lending) yesterday to assist providers of marketplace lending products; it includes information about legal obligations for operators of peer-to-peer lending in Australia. Entities looking to provide marketplace lending are encouraged to use the information sheet to help them understand current regulatory requirements.

What is marketplace lending?

Marketplace lending in the context of ASIC’s guidance is an arrangement through which retail or wholesale investors invest money, seeking to make a return, which is in turn lent to borrowers.

Marketplace lending arrangements commonly involve the use of an online platform, such as a website, on which loan requests are made. The loan request will then typically be matched against offers to invest. Under some arrangements, investors may be exposed to a loan, or a pool of loans; multiple investors may also fund a single loan.

Key obligations that may apply to marketplace lending business models

Under Australia’s current financial services and credit laws, providers of marketplace lending products and related services will generally need to hold:

  • For fundraising – an Australian Financial Services Licence (AFSL), and
  • For lending – an Australian Credit Licence (ACL) if loans made through the platform are consumer loans.

Fundraising – key obligations

Under the Corporations Act 2001 (Cth) (Corporations Act), there are requirements to ensure that retail investors have access to sufficient information to make an informed decision about whether to invest. There are also strict requirements regulating disclosure and promotional material, to ensure that there are no misleading or deceptive representation made.

There are generally two alternatives for fundraising mechanisms under the Corporations Act:

  1. Registered or unregistered managed investment schemes (MIS); or
  2. Debentures

Read more on the clarified regulatory requirements by accessing our full article on Finance Magnates or in PDF on our Media Page.

Sophie Gerber

Sophie is the director of both Sophie Grace Legal Pty Ltd and Sophie Grace Pty Ltd. Sophie has worked with some of Australia’s largest financial services organisations in compliance, legal and operational roles. She has also worked with small businesses to provide tailored solutions with a strong understanding of business practicalities as well as obligations to regulators.