The SEC has issued a cease and desist letter to online lender Prosper.com. I lend money on Prosper so I have a vested interest in the outcome.
The problem is the SEC claims that loans Prosper facilitates are actually securities (stocks/bonds) not just loans. When you sell securities there are a whole host of byzantine rules you have to follow. The SEC is trying to make sure Prosper follows the rules and claims that they haven't in the past.
From the SEC letter:
Prosper operates an online lending platform connecting borrowers with lenders. The loan
notes issued by Prosper pursuant to this platform are securities and Prosper, from approximately January 2006 through October 14, 2008, violated Sections 5(a) and (c) of the Securities Act, which prohibit the offer or sale of securities without an effective registration statement or a valid exemption from registration.
Because Prosper didn't think it was selling securities there was no reason to register with the SEC. Apparantly the SEC didnt' agree.
Isn't it nice that the SEC is always watching out for us to make sure the financial instruments we buy are always safe and secure and won't bring about a financial apocalypse. Whoops.
Maybe if the SEC had been doing something other than scrutinizing online lenders and Mark Cuban, it could have done something to forestall the current financial crisis. That's government for you. Taking out the little guys, while the big guys are allowed to rob us blind.
Thanks Uncle Sam!
What Will Happen to My Money?
I don't know. At this point it appears that we should still be able to get our money from Prosper. It appears Prosper is still collecting on bad loans so payments should keep flowing from borrowers to lenders.
Tags Peer to Peer Lending Prosper Social LendingRelated Posts
- Moving My Money Away From Prosper
- Prosper Increases Maximum Interest Rates
- Lending Money on Prosper: What Are the Risks?
- What is Prosper and How Does it Work?
- Lending Money on Prosper: My Results