The website Prosper has returned to a quiet period while completing Securities and Exchange Commission (SEC) registration.
In October 2008, the SEC had temporarily blocked Prosper from brokering new loans while it determined if the loans should be considered securities. On April 28, the site emerged from a six-month quiet period related to the SEC investigation, announcing that the California Department of Corporations had given Prosper approval to do business with California lenders. In accordance with the website’s prior cross-state agreements, this essentially allowed Prosper to work with borrowers across the country.
“Prosper was founded on the vision of creating the world’s most open, transparent and durable market for personal loans,” Prosper co-founder and CEO Chris Larsen said in a statement at the time. “(It) offers an alternative to government bailouts by empowering ordinary Americans to invest and take part in helping rebuild our economy from the ground up. While California regulators have taken the lead in embracing our model to the benefit of borrowers everywhere, we look forward to extending the Prosper marketplace to investors across the country as well.”
However, the Prosper site now indicates that this renewed quiet period will last for an indeterminate amount of time. “After much consideration we have decided to voluntarily shut down our operation in order to complete our SEC approval for a nationwide peer-to-peer lending platform,” it reads. “As a result, due to regulatory concerns, and in the interest of working toward getting our registration statement effective as soon as possible, we are discontinuing our California intrastate offering at this time.”
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As part of the renewed quiet period, no new lender or borrower requests or commitments from existing lenders will be accepted. However, existing lender agreements will remain unaffected, existing loans will continue to be served, and lenders will be able to track and monitor their loans as well as withdraw funds from their Prosper accounts. Borrowers with existing loans will be able to continue with their current borrower agreement and will remain unaffected by the SEC registration process.
Founded in February 2006, Prosper has brokered an estimated $180 million in loans amongst more than 800,000 members. Borrowers make personal requests for loans, which are then competed for by lenders offering three-year fixed loans. Lender fees provide Prosper’s revenue.
When Prosper relaunched in April, it did so with a few new rules, including the requirement that borrowers have a credit score of 640 or greater. Additionally, the site introduced its Open Market initiative to open the site to financial institutions while providing greater online investing options to lenders. As part of the Open Market, financial institutions were allowed to to sell loans on the site through an auction process.
Prosper claimed the Open Market addresses the global credit crisis by bringing financial institutions into the loop in a more transparent and less complex manner than the standard lending process. The Open Market was designed to be available to a range of lending companies including banks, credit unions, and specialty lenders.
Another new feature was Prosper’s Trading Platform. Billed as the only auction-based trading platform in the peer-to-peer lending marketplace, the Trading Platform was designed to allow the site’s lenders to sell Prosper loans to other lenders, providing a secondary market for money, credit, and online investing. However, all new products are on hold pending SEC approval.
[Update: This article has been updated to reflect Prosper’s return to a quiet period.]