P2P Money Blog

The Financial Conduct Authority have published a press release detailing their involvement with Collateral in Administration.  The FCA confirmed that they should have been consulted and were required to give approval when an administrator is appointed.  This is to ensure that the administrator acts in the best interests of the investors (in this case the lenders).  As this did not happen the FCA applied to the high court to replace the current administrators.

The full press release is published on the FCA website and a summary is below:

On 16 March 2018, the FCA made applications to the High Court in Manchester to appoint new administrators in respect of Collateral (UK) Ltd (Collateral UK), Collateral Sales Ltd and Collateral Security Trustee Ltd (together, the Collateral Companies). The Collateral Companies had been placed into administration by their directors on 28 February 2018.

The Collateral Companies operated a peer-to-peer lending platform through a website (collateraluk.com) and Collateral UK Ltd purported to hold an interim permission from the FCA to carry on regulated activities. In fact, none of the Collateral Companies held any valid authorisation or permission to carry on regulated activities. When challenged by the FCA, the Collateral Companies agreed to cease their lending activities and, on 26 February 2018, the lending platform became inoperative.

The Collateral Companies were required to obtain the approval of the FCA when appointing an administrator. This is designed to protect investors by ensuring an independent person conducts the administration in the best interests of the investors. This did not happen. Accordingly the FCA has intervened to ensure investors are protected as the law requires.

On 16 March 2018, the High Court adjourned the FCA?s applications to 27 April 2018. Until then, the Court ordered that, barring incoming payment of loan interest and repayments and certain other administrative steps, the substantive progress of the administration should be paused.

The FCA will continue to work in the best interests of investors in the Collateral Companies. The case will return to the High Court in Manchester on 27 April 2018.

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A report to creditors of Collateral (UK) Limited in Administration has been published on Financial Thing.  The document is dated 23rd March and details the events around the administration of Collateral.  This has been discussed in detail on the P2P Independent Forum.We have been in contact with the Administrators concerning this report and they have stated:

The report does seem to be one drafted by our office, but please note that this was not released by us.

The intention was for all investors to be provided with a formal report on the current position of Collateral (UK) Limited, however the FCA have advised that this report cannot be released. 

As this report is now in the public domain we can provide the following summary.  The report states that the FCA deemed that Collateral were operating an business without the required FCA permissions, and therefore requested that they stop trading.  At this point the directors of Collateral called in the administrators.  The report also states that the FCA are taking steps to remove the current Administrator.  While Collateral did not have the necessary permissions, the current administrators also not have the necessary permission to "Operating an electronic system in relation to lending" or control client money, which may be the reason why the FCA wish to step in.

The report does not appear to differentiate client funds and Collateral funds.  This is compounded by changes to Colateral's terms and conditions in February which was not advised to lenders, is causing some confusion.  Lenders were advised by the Administrators that they are not creditors, however it is unclear how interest and loans that have not been drawn down are to be treated.

It is worth remembering the P2P loans are made between lenders and borrowers, but the confusion comes in with the interest and unlent funds, and the security for the loans which are registered to one of the Collateral companies.

We have had the opportunity to interview Yann Murciano, CEO of BLEND, which launched in January 2018.  BLEND is a peer-to-peer platform that offer secured loans on property, typically outside the London bubble.  The LTV (loan to value) they have achived to date is around 50%.

What did you do before BLEND?

I was head of base metals trading at Morgan Stanley in London for 10 years. Prior to that, I was trading FX Options at ABN Amro in Chicago.