More on P2P lending

I'm very interested in the recent developments in Canadian P2P lending. I haven't been involved in these new projects, beyond signing up for e-mail updates at CommunityLend, but I've kept an eye out for news.

Today in the RedFlagDeals.com forums, I found a quoted e-mail from Phil Marleau, the president and CEO of IOU Central:

Dear IOU Central user,

First and foremost I would like to thank you for being a pioneer in a brand new idea that one day may revolutionize the way Canadians do banking. Without you, IOU Central would not be possible. Secondly, I would like to apologize for any inconvenience the recent turn of events may have caused you.

Last Thursday, the Autorité des Marchés Financiers (AMF) requested that all new activity on our website be stopped. We of course complied immediately and stopped all lending and borrowing activities. IOU Central received legal advice from a major Canadian law firm prior to its launch with respect to the Canadian regulatory environment; however, IOU Central is acting in a very new area. We are the first in Canada to offer peer-to-peer lending, although similar models are operating in the US and the UK. We are committed to working with all the relevant regulatory bodies in order to continue to offer our service to borrowers and lenders in full compliance with applicable regulations. We have initiated discussions with the AMF in order to resolve the matter as soon as possible. In the meantime, our site continues to operate with limited functionality.

Thank you for your patience and understanding. We will update you on any new developments.

Best regards,
Phil Marleau
CEO & President

So it looks like they have received a "cease and desist" order, after launching their service without having fulfilled all the regulatory requirements. I'll be interested to see whether this kills their venture, or they're able to satisfy the regulators and get back up and running.

Update

The AMF has released a communication (PDF) regarding the action against IOU Central:

IOU Central Inc.
ORDERED TO CEASE TRADING AND ACTING AS SECURITIES ADVISER

Montréal, March 3, 2008 – At the request of the Autorité des marchés financiers (AMF), the Bureau de décision et de révision en valeurs mobilières (BDRVM) issued an order on February 27, 2008 against IOU Central Inc. ("IOU") to cease any activity, directly, indirectly or by Internet, in respect of a transaction in a form of investment governed by the Securities Act (the "Act"), including any activity as a securities dealer. The BDRVM also ordered Philippe Marleau and all directors, officers, employees, representatives and mandataries of IOU to cease any activity in respect of a transaction in securities in a form of investment governed by the Act for and on behalf of IOU, including any activity as a securities dealer.

IOU's website (www.ioucentral.ca) is an internet-based market that enables people to borrow money directly from and lend money directly to other people. According to the AMF, these activities violate the Act.

In its decision, the BDRVM expressed concern about the following AMF allegations in particular:

• IOU, Philippe Marleau and the other officers assisted borrowers in distributing debt securities to lenders without a prospectus from the AMF.


• IOU, Philippe Marleau and the other officers acted as securities dealers via a website without being registered with the AMF.


• The services offered through IOU's website were market activities governed by Regulation 21-101 respecting Marketplace Operation, but IOU was not authorized to carry on such market activities.

For the protection of investors, the AMF stressed that it was imperative that the BDRVM issue this decision without a prior hearing since IOU continued to operate its website.
The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec’s financial sector.

– 30 –

Information:
Media only: Frédéric Alberro 514-940-2176
Information Centre
Québec City: 418-525-0337 Montréal: 514-395-0337
Toll-free: 1-877-525-0337
www.lautorite.qc.ca

So it looks like the issue is an alleged contravention of the Securities Act.