I've been blogging about Prosper.com since it first launched (here, here, here, and here are just a few posts). Prosper is a peer-to-peer lending site, where people with money to lend are matched up with potential borrowers. It seemed to be working (though not quite how its founders originally intended) and just as I predicted, a lot of amateur lenders learned how crucial credit scoring is after they found out what it was like to have borrowers default without warning.
Now comes news that the SEC is shutting the service down.
Part of their rationale was that there was no "regulatory scheme" to reduce risks to investors. (Prosper had argued that they weren't selling "investments" at all, but the SEC seems to have made up its mind on that point.)
Prosper will probably be back after they register with the SEC and jump through the hoops. As soon as they are part of the SEC's "regulatory scheme" they'll be permitted to resume their operations.
Thank goodness for the SEC and its "regulatory schemes." Without them, investing might be risky.
Ha, I like the bit of sarcasm here.
Just to note, LendingClub.com has completed SEC registration and is now open for lenders in most states. The process took 6 months, but now that we have that out of the way we've also established a secondary market so that the notes you purchase are liquid.
Regards,
DK
Product Ambassador
lendingclub.com
Posted by: dk | December 01, 2008 at 05:12 PM
SEC should leave these companies alone!!! I'm glad Lending Club is now open, but worried that all other players are shut down. Let's hope it's just temporarily.
Posted by: James | January 09, 2009 at 09:12 AM
"Thank goodness for the SEC". Yeah, we can't have the giants of the banking industry missing out on their cut of any and all money transaction on the planet, now can we. Can you say "Madoff"?
Posted by: BloggerRadio | February 28, 2009 at 02:46 PM