There appears to be a fair amount of confusion surrounding the Innovative Finance ISA (IFISA).
On 6 April 2016, peer-to-peer lending investments will become eligible for ISA relief. But draft legislation published last week by HMT seemed to suggest that only peer-to-peer lending platforms with full permissions will be able to take advantage. There are five peer-to-peer outfits already carrying full authorisation, thanks to a quirk in the FCA’s system. Those platforms are mostly earlier stage operators – like Funding Tree and Crowdstacker. The vast majority of lending platforms have submitted their applications to the regulator, but are unlikely to get the nod for some months.
The backlog of applications may well occupy the regulator beyond April 6th, at which time the question of whether or not interim permissions platforms may accept IFISA money becomes crucial. Sam Robinson, a Partner at Nabarro, has taken a closer look at the document entitled “The Individual Savings Account (Amendment No.2) Regulations 2016”, which was published by HMT alongside the Draft Explanatory Memorandum last week. The eagle-eyed Robinson spotted the following:
“in paragraph (iv), for “or a registered friendly society” substitute “a registered friendly society or a person who holds an interim permission under Chapter 4 of part 8 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No.2) Order 2013(a) in respect of the provisions listed in paragraph(i) and (ii) above”; and…”
The line would appear to imply that platforms carrying interim permissions will in fact be able to accept IFISA money when the April 6th deadline rolls around. However, the wording of the Draft Explanatory Memorandum appears to contradict that:
“… the instrument will update the ISA Regulations so that providers with full permissions to carry out activities detailed in Article 36H…”
Clearly the IFISA rules are at present rather muddled. The coinciding of full authorisation and IFISA eligibility has served to complicate both processes. The major peer-to-peer lenders themselves have preached patience, but are by the sounds of things lobbying HMT for a level playing field. One method of flattening the field would be to simply accelerate the authorisation process. Exactly how speedily the regulator can move is tough to ascertain, but representatives of consumer lending outfit RateSetter have noted that the process is currently progressing at a decent pace. Will it be fast enough?