I Spoke with Pennsylvania Securities Commission

I spoke with Pennsylvania Securities Commission yesterday. As it turns out, they are in fact, the regulatory body Prosper is in discussions with.

I was really impressed and pleasantly surprised because they returned my call from Thursday. So my apologies to the Official Prosper Blog for doubting their statement of who they're in discussions with, and to the Commission for questioning their familiarity with the issue. I was hasty in my comments on Thursday, but in my defense, my blood pressure still hasn't returned to healthy levels yet.

Jill from the Commission was great, at least as great as she could be with obvious restraints on what she could say, and not personally having the power to make any problems go away.

She was knowledgeable of the issue. She was very easy to talk to, and she heard me out. That was refreshing, but like Prosper, because it's an open issue, she was not able to give me any specific details, or clue me in on what direction the issue is heading.

I was hoping to find out whether "Lending" on Prosper is something the Commission frowns upon, and wants to restrict it's citizens from doing, or is it just a matter of enforcing regulation, and Prosper taking steps to comply with state regulations. She couldn't answer the question of, "Are you guys for it, or against it?"

Her response was, "All I can say is that, any action the Commission takes is to protect the interest of Pennsylvania Investors."

-Hey,

Thanks for the protection!

Glad to know you've got my back! As a personal standard, I love Government Intervention, especially when it protects me from earning good interest and using my money as I see fit for me. You're making me all warm and fuzzy.

Hey Government!!

How about protecting your citizens from ridiculous Credit Card Rates, Pay Day Loans, oh yeah, and how about the collection fee in excess of 24% of principle the Department of Education can charge, and then add to principle on student loan defaults.

Anyway, she really was helpful because she provided some information that was new to me. She did point out that there has been "no order issued against Prosper", but that Prosper is in violation of this specific regulation:

Pennsylvania Securities Act of 1972

Specifically, Section 1-201, Registration Requirement. This is on page 7 of the Act.

Long story short: According to the Act, Notes are considered Securities, and Prosper has not registered their Notes that we, as Prosper "Lenders", are purchasing, therefore Prosper is in violation of Section 1-201 of Pennsylvania Statute 70. (more formally presented as, 70 P.S. § 1-201)

Refer to page 6 of the Act if you would like to see where a "note" is defined as a Security.

It's safe to say, my conversation shed some new light on the situation.

In regards to the Pennsylvania Department of Banking, and the Loan Interest and Protection Law (Act 6 of 1974), and the Consumer Discount Company Act (Act 66 of 1937), I would say that these are NOT the regulations that are keeping me and yunz other Pennsylvania Lenders from doing our thing on Prosper. It is much more likely to be this.

Like Prosper said in their announcement, it has to do with Interpretation.

The Prosper Lender Agreement states that we are "making loan purchasing commitments" (bidding), and "purchasing promissory notes from Prosper". That is why in this post I say that it's a stretch on Pennsylvania's part in regards to the Department of Banking regulations.

The BIG question that comes to me is:

Are the Promissory Notes that we are purchasing on Prosper considered Securities?

Well yeah, according to Pennsylvania they are.

Am I satisfied with that?

NOPE -not yet.


By the way, where are all the Pennsylvania Prosper Lenders, and why haven't they signed the petition?

Please sign the petition!

Ask a friend to sign!