Hey... PA Securities Commission, You Suck!

If there is anyone who's been reading regularly, sorry for my lack of posts over the past week.

October marked the beginning of a new fiscal year for my employer and I had some remaining stuff for the last month of FY'07 to finish up.

That said, I began the work week figuring I better focus on my actual job so that I don't lose that along with my freedom to invest my hard earned dollars on Prosper.

-Plus we got a new family dog last Saturday which resulted in a pretty lively week at home.

We had to drive to Columbus, Ohio on Saturday to pick her up. Man is she a cutie! If you've never heard of OHIO before, you may recognize it as one of the six states that border Pennsylvania.

Still ringing no bells? Let me try again, it is one of six states, along with New York, West Virginia, Maryland, Delaware, and New Jersey, all bordering Pennsylvania and all from which you CAN LEND ON PROSPER.

The whole Prosper thing was lingering in the back of my mind all week, ebbing and flowing in waves of bitterness. Every so often I logged into my Prosper account, observing growth, observing earnings, and shaking my head in disgust.

I had four late loans at the beginning of the week. I logged in this morning and it was down to two. That rocks. These borrowers rock. I believe in these people. I believe in people. I'm glad I was able to help these couple of people while I had the chance. They're definitely helping me. I wish I could do more. They're helping me, I mean my employers stock has lost 40% since January! I'm cool though... my 401K has been in cash equivalencies for quite some time. Gawd forbid I have an opportunity to earn anything though.

Thanks again for your "protection" PA Securities Commission. Your notion that you're protecting us is insulting!

So yeah, thanks again.

Government, you're not always the solution... too often you're the problem

In last night's Vice Presidential debate, Governor Sarah Palin said something when commenting on Senator Biden's idea of Patriotism as it relates to taxes.

I love what she said! -I think it's true. I also think it could definitely apply to government regulators prohibiting citizens from an opportunity to earn worthwhile returns, as we are seeing here in Pennsylvania.

(Never mind the fact that our earnings on Prosper investments are taxable as regular income! -but that's a tale for another time.)

"Patriotic is saying, government, you know, you're not always the solution. In fact, too often you're the problem so, government, lessen the tax burden and on our families and get out of the way and let the private sector and our families grow and thrive and prosper."

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Just to Be Clearer-er: Seriously, It's Security Regulations

I've seen, heard, and received a couple of inquiries questioning and/or tying the prohibition of Pennsylvanians from Lending on Prosper to the Pennsylvania Department of Banking and the 6% rate cap.

The rock you want to look under though, is security regulations, and the Pennsylvania Security Commission's interpretation of said regulations.

(You might want to look at past posts here, here, and here.)

It seems that the biggest culprits in the dissemination of this information are the responses folks are receiving from their Elected Pennsylvania Officials.

My take is that for the most part, our State Representatives and Senators don't really know what is going on with Prosper, and probably aren't even in tune with the presence of, or the growing demand for p2p lending. Something that by the way, is not a big secret. -It's only a Google search away!

Instead, it probably goes something like this:

An Email from a frustrated Pennsylvanian hits their inbox.

They give the email a quick once-over.

A sip of coffee and a crumbling bite of danish later, it dawns on them that as an elected official, they should probably take a closer look.

Leaning towards their monitor, they zero in on the word "Lending".

The wheels start turning. Stroking their chin, they think, "Lending? ... Money? ... Hmm ... ... Hey! Banks lend money!"

They reach across their desk, crumbs spilling into their keyboard, and hit the intercom, "Hey, I need someone to call the Department of Banking to see what this 'Prosper Internet to Peer Lending' thing is all about."

The result is an email response from a staffer pointing out that 'Pennsylvania discourages Pay-Day-Loans of any type!' -and maybe a link, but at least mention of the Loan Interest and Protection Law (Act 6 of 1974), and the Consumer Discount Company Act (Act 66 of 1937).

So Just to be Clear:

This whole situation does NOT have to do with Banking Regs.

It has everything to do with Securities Regulations and the Registration of Promissory Notes as Securities.

Prosper was even kind enough to provide the following statement on The Official Prosper Blog, dated 9/22/08:

In response to inquiries regarding the origin of the decision to discontinue lending activity in Pennsylvania, we would like to clarify that this decision relates to the Pennsylvania Securities Commission’s interpretation of Pennsylvania securities regulations. Due to the confidential nature of our discussions with the Commission, we cannot disclose any further information about our discussions, other than to say we respectfully disagree with their interpretation and are attempting to work with them to address their concerns.

So if you are just picking up on pa4pl, or the situation in general, I hope this saves you some time, and provides some direction.

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