CITY watchdog the Financial Conduct Authority (FCA) is introducing new rules in the peer-to-peer (P2P) lending sector to protect consumers and support the market.

In line with its original proposal, it is placing a limit of 10% of investable assets on investments in P2P agreements for new customers to the sector, to ensure they do not over-expose themselves to risk.

The restriction will not apply to new customers who have received financial advice.

In addition, the rules ensure more explicit requirements to clarify what governance arrangements and controls platforms need to have in place to support the outcomes they advertise, with a focus on credit risk assessment, risk management and fair

valuation practices.

Rules will be strengthened on plans for the winding down of PTP platforms that fail, along with a requirement that platforms assess investors’ knowledge and experience of P2P investments where no advice has been given to them.

There will also be a minimum amount of information that P2P platforms need to provide to investors.

Where they offer home finance products, they will have to apply the Mortgage and Home Finance Conduct of Business (MCOB) source book and other requirements, when at least one of the investors is not an authorised home finance provider.

P2P platforms will have to implement the changes by December 9, except for the MCOB application, which is immediate.

Christopher Woolard, pictured, executive director of strategy and competition at the FCA said: “These changes are about enhancing protection for investors while allowing them to take up innovative investment opportunities.

“For P2P to continue to evolve sustainably, it is vital that investors receive the right level of protection.”