By Arden Dale Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Peer-to-peer lender Prosper Marketplace Inc. has agreed with state regulators to halt new loan sales until it complies with state securities rules.
Prosper also will pay $1 million to a group of states to settle issues related to their probe of the company.
The North American Securities Administrators Association said this week that a group of state regulators are ending the investigation as part of a settlement in principle. They had been considering or preparing enforcement actions.
The agreement in principle comes days after the Securities and Exchange Commission ordered Prosper to stop violating the law with its lending practices. The SEC issued a cease-and-desist order that has effectively blocked the company from making new loan sales until it changes the way it operates.
The peer-to-peer lender voluntarily stopped allowing new loans sales in October. It has said it is in a quiet period because it has started the process to register promissory notes it will sell to lenders in the future.
Prosper confirmed that it has agreed to settle with NASAA members, and said it is moving ahead with its registration.
Prosper runs a private online lending marketplace that lets prospective borrowers and lenders find one another. Through its Web site, the company conducts an electronic auction to fund unsecured promissory notes. The site lists potential loans, and investors bid against one another to finance them. Funds from the lowest bidders are pooled together to fund the loans, and Prosper issues notes to the lenders.
Fred Joseph, NASAA president and Colorado Securities Commissioner, said in a statement this week that the notes issued by Prosper are securities, "but since Prosper's activity began in 2006 these securities were not properly registered."
State securities regulators also found that Prosper failed to provide investors with necessary information, including its financial statements, according to NASAA.
Between February 2006 to the present, Prosper has offered and sold promissory notes with fixed annual interest rates ranging from 7% to 36%, amortized over a three-year term with equal monthly payments, NASAA said. As of Sept. 29, the company's Web site reported that it had 810,000 members and $175 million in loans funded, the group added.
Prosper neither admitted nor denied the findings in the SEC order issued last week. It said at the time that the order wouldn't have any effect on the servicing of its lender portfolios, existing lender agreements or the ability to transfer money off the platform.
Borrower agreements are in effect as well, the company said. Delinquent borrowers will be subject to collections, and reported to credit bureaus, it added.
-By Arden Dale, Dow Jones Newswires; 201-938-2052; arden.dale@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=fDjuAqlm0iAcgxiQvEfs%2Bg%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
December 02, 2008 12:15 ET (17:15 GMT)

Publié le 02 Décembre 2008 Copyright © 2008 Dowjones