Earlier this week Lending Club announced the end of their quiet period when their bid to host a secondary market for loans was approved by the SEC. This means that Lending Club users able to resume funding loans and they can later sell these notes on an open market within Lending Club’s platform. In related news, Prosper announced yesterday that they have filed a similar request with the SEC and have entered into a quiet period.
Lending Club SEC Filing Approved
Lending Club is the first P2P lending company to offer a secondary lending market. They filed their SEC papers in April and immediately entered into a quiet period in which current lenders were not able to make loans. The approval process with the SEC took 6 months. Here is a snippet of Lending Club’s secondary market announcement:
By partnering with Foliofn Investments, Inc., a registered broker dealer, Lending Club becomes the first social lending network where you have the option of a Trading Platform to put your notes up for sale in the event you need liquidity before the 36-month term of a note. Any new note (issued after October 12, 2008) can be traded on the Trading Platform. You can also buy notes from other lenders.
This is a great development for Lending Club and its members as it adds another dimension – added liquidity for investors.
Prosper Enters Quiet Period
Following several months behind Lending Club, Prosper filed paperwork with the SEC this week to offer a secondary market. While it took Lending Club 6 months to get their paperwork approved, there is no way to determine how long it will take for Prosper’s paperwork to be approved – if it gets approved.
Here is their message to Prosper members:
Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.
The registration filing is a necessary step toward making the secondary lending market available to the community. This is something many of you have been asking for, and we believe the liquidity of a secondary market will make Prosper even more vibrant.
Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you’re an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you’ll be able to track and monitor your loans; and you’ll be able to withdraw funds from your Prosper account.
If you’re a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you’re a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources.
A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we’re required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.
We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.
What does this mean for Prosper? This means current lenders will not be able to make loans through Prosper until the end of the quiet period, which could take a few months. All current loans are unaffected, and borrowers can still get new loans through Prosper. Prosper will fund loans while the quiet period is in effect. This is the same process that Lending Club went through over the previous 6 months.
What’s next for the P2P industry?
Creating a secondary market will allow investors to more easily get in and out of P2P loans, which should be good for the industry as a whole. Hopefully the SEC will approve Prosper’s bid soon – I think competition is a good thing.