Peer-to-peer lending platforms: securities law considerations

Abstract

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.

Citation

Rosenblum, R.H., Gault-Brown, S.A. and Caiazza, A.B. (2015), "Peer-to-peer lending platforms: securities law considerations", Journal of Investment Compliance, Vol. 16 No. 3, pp. 15-18. https://doi.org/10.1108/JOIC-06-2015-0038