NASAA Adopts Statement of Policy on Peer to Peer Lending

The North American Securities Administrators Association (NASAA) has announced a new Statement of Policy regarding peer-to-peer lending (P2P Lending) adopted during its annual Fall Meeting in Nashville.

P2P lending is the act of individual investors providing capital to a borrower – either for a single loan or a basket of loans. A platform can make a market between borrower and lender (investor), typically taking a fee and/or a small percentage of the transaction. Today, most online lenders allowing individual investors are now marketplace lenders with capital coming from institutional money as well. Many, platforms have moved away from P2P lending due to challenges involving scale.

The Statement of Policy regarding P2P was announced alongside another policy involving Franchise Questionnaires.

In a release, NASAA stated:

“The peer-to-peer lending statement of policy sets forth requirements for lending platforms, including demonstrating a platform’s net worth, solvency and regulatory compliance. The statement of policy also requires officers and directors of platforms to be knowledgeable and experienced, requires independent directors to engage in certain oversight activities, and limits the ability of platforms to indemnify their officers and affiliates.”

NASAA President Melanie Senter Lubin commented:

“Both statements of policy reflect NASAA’s mission to protect investors and support responsible capital formation. The franchise statement of policy is designed to better protect franchisees from unscrupulous franchisors that routinely use questionnaires and acknowledgments to try to limit their potential liability to franchisees. The peer-to-peer lending statement of policy sets standards to better protect investors in those products.”

Andrea Seidt, NASAA’s Corporation Finance Section Committee Chair and Ohio Securities Commissioner, added:

“Our policy sets ground rules for peer-to-peer lending relationships and to help investors in such relationships become better informed.”

The Statement of Policy does not make it law at the state level and the document notes that “while applications not conforming to the standards contained herein will be looked upon with disfavor, where sufficient justification is provided, certain guidelines may be modified or waived by the Administrator.”

Certain points of interest include the inability of platforms to “indemnify its officers or affiliates for any liability or loss to investors or borrowers participating on the Lending Platform due to their negligence or misconduct.”

Secondary trading garners some attention, the Statement demands the “Administrator may require the Lending Platform to disclose information about its compliance with the Securities Exchange Act of 1934.”

NASAA aims to set limits on individual investor participation based on an individual’s net worth and/or net income. There is plenty more.

You can download the P2P Statement of Policy here or view it below.


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