Earlier this year, Mintos applied for the Investment Firm license as well as for an Electronic Money Institution license. Now, as we come closer to implementing various changes related to the anticipated licenses, we’re sharing more on how becoming a regulated marketplace will affect investors.
- Mintos will introduce new policies and investment frameworks according to regulations
- Investors will have two separate accounts for investments and payments
- There will be suitability and appropriateness assessments for investors
- Loans on Mintos will be transformed into financial instruments linked to loans
- Underlying risks of investing in loans will still remain present, as always
Focus on the protection of investors’ funds and rights
By becoming a regulated marketplace for investing in loans we aim to introduce clear policies, investment frameworks, and prospectuses, that will decrease operational risks of the platform and further increase the level of transparency.
We believe it’s a step further to a future where loans will be as common on investors’ portfolios as stocks, ETFs, and bonds.
The protection we will provide comes in three forms:
1. Increased security for investors’ funds
Investors will have easier access and more control over their funds on Mintos via having two separate accounts – one for investments (like it is now) and one for payments and Mintos debit card (in the future). Both accounts will be regulated under special EU enactments: MiFID II for investment accounts and PSD2 for payment accounts, as well as subject to the requirement to hold the clients’ funds with a segregated account in an EU bank.
Another important aspect of the increased security will include a state-guaranteed investor protection system that safeguards up to € 20 000 per investor in cases when and if Mintos as a service provider defaults or is a subject of critical issues. We will share more details on what potential issues will and what won’t be covered, as well as when and how will the protection system become active.
Investors should note that despite Mintos becoming a regulated marketplace, underlying risks of investing in loans will still remain present, as always.
2. Change of the structure of investments
While the experience for investors on Mintos will not change significantly, the setup of the product structure will change. This means that Mintos will be creating and implementing a new setup with each lending company in accordance with the regulation.
New financial instruments linked to loans, currently planned to be labeled as Mintos Loan Notes, will gradually replace current assignment agreements with lending companies, ensure more transparent cash flows from borrower repayments, and provide more leverage to Mintos to protect investor interests in case of any issues.
3. Improved internal control processes
Since the end of 2018, Mintos has allocated a significant amount of resources to create and strengthen internal control processes, anti-money laundering prevention measures being one of the few to mention. The Know Your Customer (KYC) requirements for Mintos investors remain one of our priorities to offer a safe space for investing. To be ready to run operations as a regulated marketplace, Mintos has further invested in the development of these internal controls.
Also, Mintos will be operating under the EU regulatory framework for investment firms and under the supervision of the Financial and Capital Market Commission (FCMC). In practical terms, it means the operations of Mintos will be subject to regular reviews by the FCMC, making sure all processes are in line with EU well-established regulations like 5th AML Directive, MiFID II, Prospectus Regulation, as well as many others.
Testing investors’ knowledge and experience
We also have started to prepare for conduct requirements – assessments on whether a chosen investment is suitable and appropriate for the investor’s knowledge, experience, financial situation, and investment objectives.
We will have two assessments:
- Appropriateness test – used for Manual and Auto investments to evaluate investor’s knowledge and experience. If failed, investors will be able to invest with a warning.
- Suitability test – used for Mintos Strategies to evaluate investors’ financial situation, investment objectives, as well as knowledge and experience. If failed, some of the investing strategies might not be available for investing if they are not suitable for the investor.
Using such tests will help us to make sure we are offering investment products tailored to the investor experience level and to protect those only starting to invest in loans. The current plan is to start the implementation of both in October 2020.
We’re looking forward to sharing more updates in the near future, so stay tuned.