Prosper.com Shut Down by the SEC
Prosper.com is a very unique system of lending that allowed private consumers to connect with private lenders to achieve their financial goals. It was extremely successful, and led the S&P 500 on returns on investment (ROI) at an average 9.2%.
Well, as is the case when Americans are making money without the government getting a piece of the pie, the SEC shut them down on November 24th. This is a great travesty, another one, that has taken away one of the best options for getting a loan without going to a bank.
"Prosper was a free and transparent marketplace…and the market was allowed to set the interest rate. So if the market decided Prosper’s debt was pretty speculative – meaning below the safety of investment-grade, which it did – it could charge a higher interest rate to compensate for defaults and discourage frivolous borrowing. Which it did.
But then, in rode the SEC. And with long and overly-legal C&D (Cease an Desist) letter, they announced that Prosper’s loans were actually securities and needed to be regulated as such. I’m glad the SEC found the time – between headline cases like Martha Stewart and Mark Cuban – to do something remotely resembling their duty.
I understand that they couldn’t be bothered with trivial things – like keeping ratings agencies in check, sussing out mortgage security fraud or warming up for the Madoff disaster that would blow up in their face in about three short weeks – but the actual timing seems a little…curious to say the least.
They shut down Prosper on November 24th of last year. Curious timing indeed, eh?
That was after Lehman imploded and the Credit Crunch set in. Banks were failing left and right, and the remaining banks were failing to get the job done; thanks to billions in toxic sub-prime garbage and a fundamentally flawed lending structure. Everyone from former President Bush to President Elect Obama was talking about “getting the credit flowing again,” and yet here they are, stomping out a revolutionary new channel for credit. What gives?
Maybe they were scared.
Now I’ll steer clear of the conspiracy talk today. But if you’re trying to remember the term, it’s called “rent-seeking.” The Economist defines rent-seeking as “Cutting yourself a bigger slice of the cake rather than making the cake bigger. Trying to make more money without producing more for customers.” If you were wondering who tugs at the SEC’s leash, this whole event might be a good indication." - courtesy of the Sovereign Society
Here is what Prosper has to say about it:
"Prosper Filing Registration Statement; Enters Quiet Period
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.
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. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.
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. "
Go to www.prosper.com and send them an email wishing them your best. Let's hope they get through this mess and can get back up and running soon. Just another reason why we need to find other ways to help each other.
Well, as is the case when Americans are making money without the government getting a piece of the pie, the SEC shut them down on November 24th. This is a great travesty, another one, that has taken away one of the best options for getting a loan without going to a bank.
"Prosper was a free and transparent marketplace…and the market was allowed to set the interest rate. So if the market decided Prosper’s debt was pretty speculative – meaning below the safety of investment-grade, which it did – it could charge a higher interest rate to compensate for defaults and discourage frivolous borrowing. Which it did.
But then, in rode the SEC. And with long and overly-legal C&D (Cease an Desist) letter, they announced that Prosper’s loans were actually securities and needed to be regulated as such. I’m glad the SEC found the time – between headline cases like Martha Stewart and Mark Cuban – to do something remotely resembling their duty.
I understand that they couldn’t be bothered with trivial things – like keeping ratings agencies in check, sussing out mortgage security fraud or warming up for the Madoff disaster that would blow up in their face in about three short weeks – but the actual timing seems a little…curious to say the least.
They shut down Prosper on November 24th of last year. Curious timing indeed, eh?
That was after Lehman imploded and the Credit Crunch set in. Banks were failing left and right, and the remaining banks were failing to get the job done; thanks to billions in toxic sub-prime garbage and a fundamentally flawed lending structure. Everyone from former President Bush to President Elect Obama was talking about “getting the credit flowing again,” and yet here they are, stomping out a revolutionary new channel for credit. What gives?
Maybe they were scared.
Now I’ll steer clear of the conspiracy talk today. But if you’re trying to remember the term, it’s called “rent-seeking.” The Economist defines rent-seeking as “Cutting yourself a bigger slice of the cake rather than making the cake bigger. Trying to make more money without producing more for customers.” If you were wondering who tugs at the SEC’s leash, this whole event might be a good indication." - courtesy of the Sovereign Society
Here is what Prosper has to say about it:
"Prosper Filing Registration Statement; Enters Quiet Period
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.
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. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.
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. "
Go to www.prosper.com and send them an email wishing them your best. Let's hope they get through this mess and can get back up and running soon. Just another reason why we need to find other ways to help each other.
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