UK Govt has no plans for inquiry into failure of Funding Secure
P2P lending platform Funding Secure entered into administration on October 23, 2019.
Less than a fortnight after the UK Financial Conduct Authority (FCA) confirmed that peer to peer (P2P) lending platform FundingSecure Ltd entered into administration, the UK Government has made it clear it has no plans for an inquiry into the matter.
On October 31, 2019, the Earl of Courtown said:
“The Government does not intend to establish an inquiry into the failure of the peer-to-peer (P2P) lending platform Funding Secure, which entered into administration on 23 October”.
He added that the Government monitors the P2P lending sector on an ongoing basis and engages regularly with P2P platforms and the FCA, which is responsible for the regulation of the sector.
The FCA is operationally independent from Government, the Earl of Courtown noted.
FundingSecure Ltd (FSL) is a peer to peer lending platform which creates high yield loans between investors and third party borrowers secured on UK properties and other miscellaneous high value assets and chattels including jewellery, motor cars and boats. The company facilitated substantial loans from retail investors to third party borrowers and the loan book currently stands at £80 million approximately, according to the administrators. The accumulated loan book represents approximately 486 investor loans from circa 3,500 investors.
The directors of FSL passed a resolution to appoint the Administrators because the company had become insolvent and the Notice of Appointment of the Administrators was filed in court on October 23, 2019 following the approval from the FCA.
The rationale for the appointment of the Administrators is that there is a real risk that liquidation would fundamentally damage the value of FSL’s assets and undermine the potential return to investors and creditors. The management believes that liquidation would lead to the cessation of key operational IT systems (essential to the operation of the online account system for client funds operated by the company) and the loss of key staff which would may be detrimental to the asset realisation process and increase the costs of recovery activity.
Given these issues, the directors decided to place the company into administration and the FCA provided their consent to CG Recovery’s appointment as Administrators.