We wholeheartedly intend to keep investing in our team and infrastructure with a confident view of furthering Kuflink’s purpose of ‘Connecting People to Financial Freedom’.
Kuflink has continued with its strong commitment to investing in the future of the platform. Developing new products and features centred around user experience has been at the core of its research and development. Nevertheless, as required by Regulations and being a responsible peer-to-peer platform, Kuflink also monitors its risks and has developed contingency plans for a variety of scenarios.
What would happen if Kuflink did not wish to continue accepting any new business?
If Kuflink decided to stop accepting any new business, Kuflink’s 'Wind Down Plan' ('WDP') would come into effect.
Winding down essentially means closing down the business. To ensure that this can happen in an orderly manner, and with the least disruption to you and your existing investments, Kuflink has investigated what steps would need to be taken and what resources would need to be available, should the business be hit by an unexpected crisis.
This WDP is designed for Kuflink and a few select individuals to continue for two years to wind down the book to zero. All expenses have been predicted and these funds have been put aside in a segregated bank account.
The WDP would be managed in-house by existing staff, systems and with the same regulatory rules and requirements that the platform currently operates within. This would allow Kuflink to use its products and platform expertise to maintain the quality of the execution of the plan, minimising risks that would arise if we were to transfer operations to a third-party provider, and maximising outcomes for our customers.
Kuflink constantly works with the FCA and monitors the WDP as the business evolves to ensure the amount put aside is sufficient to cover a sensible wind-down of the business.
There are 6 important things for you to remember:
- The security provided by our borrowers is not held directly by the platform but by a separate company called Kuflink Security Trustees Ltd, this is an asset holding company only and does not trade. Please note, Kuflink’s stake will be the last amount that is paid during this process.
- If you have any active loan investments these should continue, our collections team will go on administering the loan book, collect payments from borrowers and enforce the terms of the lending contract on your behalf.
- If you hold money in a wallet that is in your personal name, this will continue to be held in a separate Client Money Account so it can be returned to you and cannot get lost in the closing down process.
- Unlike personal accounts, funds held in a corporate account are not protected under the FCA’s Client Asset Sourcebook (CASS) rules.
- It is likely that the majority of funds due to you are from active loan investments with only a relatively small amount being held in your Kuflink wallet. You must remember that balances not yet received by Kuflink from borrowers would be excluded from the client money protections afforded by the CASS rules.
- Even with all this effort, Kuflink cannot guarantee that you will receive back what you originally invested.
In practice, Kuflink would reduce the functionality of the platform to simplify operations. This means, at the start of the WDP, we would cease accepting any new investors or funds, cease advancing new loans or providing new funding on existing loans and suspending the secondary market. The loan portfolio would operate as normal with loans continuing to repay capital and interest, and investors would be able to withdraw funds once these funds become available. We will process repayments through the client money systems, returning funds to investors’ accounts on the platform. We will facilitate withdrawals by lenders from the platform once repayments are credited to their account.
Kuflink will attempt to refinance some loans on the platform to other commercial lenders, in particular Development loans, which platform lenders would be unable to continue to fund.
A decision to no longer accept new business would result in Kuflink ceasing to qualify as an ISA Manager and therefore must inform HMRC and each investor within 30 calendar days of the date Kuflink ceased to qualify, i.e. from the date the wind-down resolution was passed.
The notice to investors would inform them of their right to transfer their ISAs to another manager. If circumstances allow, Kuflink will endeavour to make arrangements with another comparable property-backed IF ISA manager, which can offer terms comparable to those of Kuflink to help investors with this process.
Would management of loans change in any way during the WDP?
No, as during the WDP Kuflink is closed to new business and it would still manage all loans in line with their contractually agreed terms, and the loans would be collected out and funds returned to lenders over the agreed terms of the loans, or earlier if loans are redeemed early. Of course, there is always a risk that borrowers may cease to repay their loans and therefore loan contracts may not run to their full term.
What happens if Kuflink were to go into administration?
The FCA (SYSC 4.1.8DBR) requires firms to have a Resolution Manual in place to assist an administrator in taking over the running of the business. The Manual sets out how the platform works and what systems and people are required operationally to ensure the platform continues to operate and that service to investors and borrowers continue.
It is important to note that investors lend directly to borrowers, meaning that investors hold contracts directly with borrowers. These contracts continue to exist in the event of an administration of the platform. Also, any money from Individual investors placed on the Kuflink platform but not lent out to borrowers is held in a segregated bank account. This separation of funds ensures client monies are easily identifiable by an administrator and are separate from any claim creditors may have on Kuflink’s own assets.
It is possible that the administrator appointed may not be subject to the same regulatory regime and requirements as Kuflink. As a result, there is a possibility that any regulatory protections may be reduced or are no longer available. Investors should also consider the possibility that in extreme circumstances their P2P loans may cease to be managed and administered before they mature.