P2P & Investment Schemes
- Since the 2008 financial crisis, record low interest rates have forced would-be depositors to look elsewhere to make a return on their capital and risk-averse mainstream lenders have withdrawn from the near prime market, driving a number of consumers and SMEs to look elsewhere for affordable credit.
- The combined effect of the above (combined with technological advancements) has been a boom in the alternative finance market, with borrowers looking to raise funds directly from investors through investment schemes (such as minibonds or crowdfunding) or alternatively via a P2P lending platform.
- However, these products are inherently risky for investors, as:
- many of the borrowers are of lower credit quality;
- the costs of any intermediary (for example, mini-bonds have historically paid a c.20% marketing fee) can make the required return (and therefore risk) on the underlying loans incongruent with investor risk appetite; and
- for SMEs, the borrowers can be pre-revenue, have minimal assets to collateralise lending, and have inadequate governance and controls thus increasing the risk of fraud or misappropriation.
- Many high-profile firms in the sector have failed in recent times (e.g. London Capital and Finance, Lendy, Blackmore Bonds, and Basset & Gold) and the FCA has therefore identified P2P as of high risk for customer harm and is taking an active interest in the adequacy of their solvent wind down plans.
- The Group received loans from retail investors which is used to lend to sub-prime borrowers.
- We were engaged by the regulator to review the solvency of the group.
- Our work included a desktop review of the underlying business model, balance sheet and assets and considered whether there were any risks to the group not being able to repay the retail investment absent further lending.
- Appointed administrators and liquidators of various UK and Channel Island companies engaged in raising money from retail investors via mini-bonds and other means. Although the UK mini-bond entities were unregulated, the CI funds were regulated by the GFSA.
- Upon appointment the companies had minimal assets and our primary focus was to review the company records and bank accounts to identify how investor funds had been dispersed, and potential recovery actions that could be taken.
- Legal claims remain on going.
- Appointed as compulsory liquidator of this unregulated entity, which was used by its shareholder/director to borrow money from retail investors.
- The director told investors that these funds were being on-lent to an electrical wholesaler, but investigations revealed that the company was part of a Ponzi scheme and the director was subsequently imprisoned.
- At the time of our appointment, the company had minimal assets and our primary focus was to review the company’s records and bank accounts to identify potential claims. In total, c. 30% of investor losses were recovered from claims against the director and third parties.
Details of the entity providing services, legal and regulatory information in respect of the Teneo entity are also included in our engagement letters.
Teneo Financial Advisory (DIFC) Limited is authorised and regulated by the Dubai Financial Services Authority for the provision of Advising on Financial Products or Credit and Arranging Credit or Deals in Investment services
Specific information relating to our regulated entities which provide services to clients is detailed below:
|Registered Name||Legal Form||Registration Location and Reference||Registered Office||Data Protection||Regulator(s)||Professional Indemnity Insurance|
|Teneo Financial Advisory Limited||Limited Company||England & Wales, 13192958||5th Floor, 6 More London Place, London, SE1 2DA||UK - ZA920639||The Institute of Chartered Accountants in England and Wales (“ICAEW”) C008873136. All insolvency practitioners are licenced by the ICAEW. ICAEW Designated Professional Body licence for a range of investment business activities.||Details of the professional indemnity insurer can be provided on request.|
|Teneo Securities LLC||Limited Liability Company||USA - Delaware||280 Park Avenue, 4th Floor, New York, NY 10017||N/A||Financial Industry Regulatory Authority (FINRA) #151256. Securities and Exchange Commission (SEC).||Details of the professional indemnity insurer can be provided on request.|
Teneo Securities LLC’s Business Continuity Planning
Teneo Securities LLC has developed a Business Continuity Plan (“BCP”) on how we will respond to events that significantly disrupt our business. Since the timing and impact of disasters and disruptions is unpredictable, we will have to be flexible in responding to actual events as they occur. With that in mind, we are providing you with this information on our BCP.
The Firm has developed and installed a BCP in the case of any business disruption that causes the Firm to have limited or no communications with its employees or customers. Our plan anticipates two types of business disruptions, internal disruptions which affect only our Firm’s ability to do business (such as a fire in our building) and external disruptions that prevent the operation of securities markets or other firms (such as natural disasters or acts of war).
The Firm intends to stay in business during both internal and external disruptions due to the fact that the Firm employees can conduct Firm related business from alternate off-site physical locations and the Firm maintains an alternate location for the maintenance of its books and records. We anticipate that the Firm will recover from internal business disruptions within 24-48 hours. An outage due to an external business disruption may be longer and is beyond the control of the Firm. However, the Firm will endeavor to resume business as soon as it is possible for the Firm to establish business operations from alternate off-site physical locations.
The Firm’s BCP specifically addresses the following areas related to Firm operations:
- Data back-up and recovery (hard copy and electronic);
- All mission critical systems;
- Procedures to test and determine the Firm’s ability to do business (i.e., financial and operational assessments);
- Alternate communications between customers and the Firm;
- Alternate communications between the Firm and its employees;
- Alternate physical location of employees;
- Critical business constituent, bank, and counter-party impact;
- Regulatory reporting; and
- Communications with regulators.
If you have questions about our business continuity planning, you can contact us (212) 886-1600.