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Translating the new peer-to-peer rules

As part of the new Financial Conduct Authority (FCA) regulations on the peer-to-peer (P2P) industry which come into effect on 9 December, we’ll need you to confirm your level of experience with P2P on a yearly basis.

Based on this information, you’ll then be given the investor profile that best suits the details you’ve given. In some cases, the profile you fall into can lead to restrictions on how much you can invest in P2P. 

To help demystify what category best suits you, we’ve broken down the details below. 

Certified sophisticated investor

For our current investors, we’re able to review how you’ve used Zopa to decide if your experience means you should qualify as what the FCA refers to as a ‘certified sophisticated investor’. If this is the case, there will be no restrictions placed on how much you can invest in P2P.

For us to class you as a ‘certified sophisticated investor’, one of the following must be true:  

  • You have added new funds into Zopa at least twice in the past 2 years
  • You have reinvesting turned on and your first investment in Zopa was at least 1 year ago 

Self-certified sophisticated investor  

If you don’t meet the criteria for certified sophisticated investors, you can self-certify. ‘Self-certified sophisticated investors’ must still have a good level of experience with investing and P2P. If you qualify, there are no restrictions on how much you can invest in P2P.  

To be a ‘self-certified sophisticated investor’, one of the following must be true:   

  • You have made more than one investment in a P2P agreement or portfolio in the past 2 years 
  • You work, or have worked in the past 2 years, in a professional capacity relating to finance, resulting in an understanding of P2P  
  • You are currently, or have been in the past 2 years, a director of a company with an annual turnover of at least £1 million 
  • You are a member of a network or syndicate of business angels and have been so for at least the last 6 months

High net worth investor  

To qualify as a ‘high net worth investor’, according to the FCA’s definition, you earn more than £100,000 per year, or hold net assets of at least £250,000. (See below for some guidance on working out your net assets.) 

If you fall into this category, there are no restrictions on how much you can invest in P2P. 

Restricted investor  

Those with less experience in P2P may fall into the ‘restricted investor’ category. This means that until you’ve gained some more experience, you shouldn’t invest more than 10% of your net assets in P2P.  

If you’re a restricted investor, but you’ve already invested more than 10% of your net assets in P2P, here’s what to do:   

First off, you’re under no obligation to turn off your reinvestments or sell any loans you’re currently invested in. You just can’t add new money to your account for now. Consider taking some time to monitor your Zopa investment. With reinvestments turned on, your loan book will continue to diversify and grow. 

It could also be worth chatting to an independent financial advisor for guidance on your restricted investor status. Or, you can give us a call. We don’t offer financial advice, but we can answer questions about your Zopa investment.

In 12 months, we’ll check in to see if your situation has changed. After this you’ll be in a better position to decide whether the FCA’s definition of you as a ‘restricted investor’ is the right one.

Net assets  

According to the FCA regulations, restricted investors should not invest more than 10% of their net assets across P2P platforms. But how do you calculate this? The FCA provides this guidance on what not to include as a net asset: 

  • The property which is your primary residence or any money raised through a loan secured on that property
  • Any rights you have under a qualifying contract of insurance 
  • Any benefits (in the form of pensions or otherwise) which are payable on the termination of your service, death or retirement which you may be entitled 
  • Any withdrawals from your pension savings (except where the withdrawals are used directly for income in retirement).