ASIC tightens rules around P2P lending and robo advice

The Australian Securities and Investments Commission (ASIC), has warned P2P lending start-ups that they must meet certain financial services licence obligations, as the regulator increases rules around so-called “robo advice” services that use algorithms to issue financial products to consumers. ASIC issued a statement saying: “"As a responsible entity, the marketplace lending provider must act in the best interests of members and give priority to the interests of scheme members, including when there is a conflict [of interest],” and warned it would take action over any deceptive or misleading conduct.

The corporate regulator has warned the burgeoning peer-to-peer lending sector that it won't be allowed to make an Uber-like sidestep of the existing rules, telling start-ups they must meet financial services licence obligations.

It comes as the watchdog moves to tighten rules around online lenders using algorithms – or "robo advice" – to issue financial products to consumers.

SocietyOne co-founder Matt Symons. Credit: Michel O'Sullivan

Peer-to-peer lenders, also called marketplace lenders or P2P lenders, operate by matching up consumers to lenders or investors via an online platform.

While they are not covered by banking rules, they must operate under an Australian Financial Services License.