Peer-to-peer lending platforms: securities law considerations

• Published in: The journal of investment compliance 2015-09, Vol.16 (3), p.15-18
• Main Authors: Rosenblum, Robert H, Gault-Brown, Susan A, Caiazza, Amy B
• Format: Article
• Language: English
• Subjects: Accounting & Finance; Financial investment/markets
• ISSN: 1528-5812; 1758-7476
• DOI: 10.1108/JOIC-06-2015-0038

Purpose – To provide an overview of the basic model used by many peer-to-peer lending platforms and some of the key peer lending regulatory and structuring considerations under the federal securities laws. Design/methodology/approach – Explains how the basic peer lending model works, how “borrower dependent notes” or “BDNs” may be offered in private placements or less commonly through public offerings, how companies engaged in peer lending are compensated, how sponsors of peer lending programs generally avoid registration as broker-dealers under the Securities Exchange Act of 1934, as investment advisers under the Investment Advisers Act of 1940 and as investment companies under the Investment Company Act of 1940, and how peer lending platforms are structured to take into account the laws that govern online transactions, consumer privacy, and other related issues. Findings – The authors expect that peer-to-peer lending platforms will continue to mature and evolve, and they expect that the issues discussed in this article will continue to drive their structuring decisions, business models, and regulatory compliance under the federal securities laws. Originality/value – Practical guidance from experienced financial services lawyers.