The Prosper "Quiet" Diary - millstones and milestones

[Investar]

Today Chris Larsen on the PROSPER BLOG says it all....

Thank You Prosper Community, Thank You California!
http://blog.prosper.com/2009/04/28/welcome-back/

Sources for more information:
--- Prosper Help Pages
--- Prosper Legal Compliance
--- Prosper 50 State Progress - Blue Sky - Lend Trade Borrow

[go4reward]

Today Chris Larsen on the PROSPER BLOG says it all....

Thank You Prosper Community, Thank You California!
http://blog.prosper.com/2009/04/28/welcome-back/

Sources for more information:
--- Prosper Help Pages
--- Prosper Legal Compliance
--- Prosper 50 State Progress - Blue Sky - Lend Trade Borrow

It is no longer "Quiet" now. If click on the "join now" button, and it will lead you to the "Become Lender" option. Once you click that button, you can join Prosper as a lender, but the only problem is for California only. I hope other states will soon to join in soon.

[Investar]

California Only?
What's Up With Thatl?
Ya Ain't Outta The 'Quiet' Just Yet

On April 28 The Wall Street Journal reported, "Since Prosper's Securities and Exchange Commission registration process is still going on, it is operating under an intra-state exemption from the California Department of Corporations. That means that, for now, only California residents and businesses will be able to lend or invest in Prosper loans, although borrowers nationwide can apply for a loan. Once the company completes its registration process, other financial institutions and lenders in other states will follow, says Chris Larsen, Prosper's chief executive."

And The New York Times noted, "Prosper has been ... obeying an S.E.C.-mandated quiet period. But as it turns out, the start-up, which is based in San Francisco, has been staying quite busy ... as it seeks to emerge from regulatory limbo. The company is hoping for approval by the S.E.C. soon so it can open to all lenders nationwide, although Mr. Larsen concedes that the agency might be a bit distracted with other matters these days."

P2P Lending News weighed in with a meaningful recap on the matter titled, Prosper Relaunches in California Without SEC Approval. Read it. The post characterizes platform changes and Prosper's national posture after the three day outage.

The national Prosper Marketplace remains in the dark. What began operating on Tuesday April 28, 2009 is a mini-Prosper — a separate home-state-only entity beyond the reach of the United States Securities and Exchange Commission. It has its own set of Lender Agreements and Promissory Notes. It does 'borrow' most of the national platform Prosper has proposed to the federal securities regulators.

[Investar]

Class Action Law Suit
Lenders Answer the Director's Protest,
Court Moves a Hearing Date

Class Action Suit Monitor blogs, "Following a flurry of paper flying back and forth, it’s beginning to look like a scheduled May 7 hearing may actually take place." Plaintiff’s counsel filed new documents with the court late Friday, the 24th. These included Memorandum Of Points And Authorities In Opposition To The Demurrer (their reply to the Prosper Director's protest) and the mundane but necessary Proof Of Service for same (a declaration that copies were provided to everyone entitled to receive them before being filed with the court).

On the 28th the Court agreed to see if anybody ought to be let off the hook before things get started. "Complex Litigation" proceedings were continued (postponed) from April 30 to June 11 and the court will hear the Demurrer first, on May 7.

So now the calendar of events reads:
1) Demurrer by the Outside Directors on May 7.
2) Formal recognition of the law suit as a "complex litigation" case on June 11.
3) Certification of the law suit as a Class Action on June 18.
‡) The MAIN EVENT, hearing the actual Complaint for Violations of Securities Laws of November 26, 2008 as amended Feb 26, 2009, remains unscheduled.

[Investar]

Turn out the lights,
Shut the door.
Prosper turns quiet,
Quiet once more.

You saw it on your screens Saturday:
Prosper is in a quiet period and is not accepting any new Borrower or Lender
registrations until our registration statement with the SEC becomes effective.
To learn more: Prosper> Help> General> Quiet Period

Very early Saturday morning Prosper emailed the participants:
[box]Sent: 5/9/2009 12:07:09 A.M. Pacific Daylight Time
Subj: Discontinuance of CA State Offering

Dear First Name,

We are writing to inform you that we are discontinuing our California intrastate offering at this time.

We have been overwhelmed by the outcry from potential investors around the country who want to participate in peer-to-peer lending. Therefore, 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.

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.

As a result of this decision, we will not be accepting new lender or borrower registrations or loans, or new commitments from existing lenders effective immediately. Until this process is complete, we are required to be in a quiet period and will be unable to respond to press, blogger or other inquiries related to our SEC registration process, even though we would like to.

We want to assure you that Prosper is looking forward to being able to offer a transparent, durable and participatory lending institution very soon.

We sincerely apologize for this inconvenience or disappointment our decision may have caused. We want to thank you for your continued support and patience. We look forward to serving the needs of the community in the hopefully not too distant future.

Regards,
Prosper Marketplace, Inc
[/box]


So what are they trying to tell us?

The phrase, "voluntarily shut down" sounds an awful lot like the olde "Your fired!" "No, you can't fire me, I quit!" syndrome. No company in their 'right mind' turns away all their existing business because they might get other business in the future. Not voluntarily anyway.

"Until this process is complete, we are required to be in a quiet period" is more telling. It suggests 'mother' SEC has warned the 'kids' not to be playing in the sandbox in California while they are dressing for Sunday-go-to-meetin' in Washington. Perhaps there was grumbling elsewhere in the nation. Bear in mind that at least some of the states are looking at Prosper's proposal too. (see Prosper 50 State Progress)
 
As for the phrase, "unable to respond... even though we would like to." — Prosper has hired a Washington DC lobbying concern to promote themselves and P2P lending. Read a PDF of the Lobbying Disclosure here. Meanwhile, Fix The Credit Crisis.org, the bully pulpit they set up for individual lenders to lobby on their own was shut down Saturday morning (fixthecreditcrisis.org now redirects to prosper.com).

Let's suppose for a moment this WAS all voluntary on Prosper's part. What could that mean? It could mean they are within 30 days of SEC approval and can't say so, "even though we would like to." Perhaps they've got their final interrogatives and an invitation to "Accelerate" and the amended Form S-1a that will be approved by the SEC is on its way.

[go4reward]

Wow! This is interesting. Not operational until all states are approved. Personally I think just California can lend does not make sense for all lenders.

[deskguy]

Wow! This is interesting. Not operational until all states are approved. Personally I think just California can lend does not make sense for all lenders.
----------------------------
'not operational until all states are approved?' right. tell that to lending club, currently lending only half the 50 states. nothing is that simple.

 deskguy

[Investar]

Class Action Law Suit
Court Overbooked on May 7th 

Judge Richard A Kramer was unable to hear Prosper's Notice Of Demurrer To First Amended Complaint on May 7th. Another case still in progress usurped the 9:00am time slot. As a result, it was the Court who postponed Prosper's first appearance this time. It is doubtful the Court will be able to reschedule before sometime in June.

The timeline of preliminary posturing for the MAIN EVENT now reads:
1) Demurrer by the Outside Directors -- temporarily unscheduled
2) Formal recognition of the law suit as a "complex litigation" case -- June 11
3) Certification of the law suit as a Class Action -- June 18
‡) The MAIN EVENT, hearing the actual Complaint for Violations of Securities Laws of November 26, 2008 as amended Feb 26, 2009 -- unscheduled thus far

[Investar]

California Note Buyback
Spells End Of Days

This morning one of my INVESTAR Lenders from California reported, "And this morning they repurchased that note." This action confirmed a rumor about Prosper's California-only shutdown.

Since the mini-marketplace operated for just 11 days and listings were scheduled to run 14 days, very few loan notes were generated. The mini-corporation would buy these back from lenders. In fact, Prosper-watchers at Pro$pers.org saw this happening as early as May 7th, two days before the shut-down. Five borrowers had 'cashed in' their listings early. Their notes were created, then repurchased from lenders.

This begs the question, did Prosper really intend to operate the mini-platform in the first place? Was it a ruse from the get-go? Some sort of testing of the waters? In any case, the buy-back allows CEO Chris Larson, who funded the corporation with his own money, to close up shop. Stripped of any obligation to service lenders for three years, the enterprise has no third party interests. It appears the Prosper-California experiment is finished for good.

[deskguy]

In any case, the buy-back allows CEO Chris Larson, who funded the corporation with his own money, to close up shop. Stripped of any obligation to service lenders for three years, the enterprise has no third party interests. It appears the Prosper-California experiment is finished for good.
------------------------------------------
  investar, it is too early in the morning for heavy-duty brainwork. what do you suppose that means down the road for the rest of us?   

 deskguy

[Investar]

It appears the Prosper-California experiment is finished for good.

investar, it is too early in the morning for heavy-duty brainwork. what do you suppose that means down the road for the rest of us?

Well, I tell ya 'Guy', I'm not sure the California side-show really means anything, at least not in the short term. Longer term, do you recall all those amazing flying contraptions that appeared before the Wright Brothers figured out how to build an airplane? That's where the whole idea of Peer-To-Peer lending stands in its historical time line -- at the very beginning. It clearly does not fit the regulatory skies in which it attempts to fly. But we will keep trying. Regulatory change will come. A decade from now we'll look back and smile.

My favorite failed aero-machine was the Pitts Sky Car, created in 1928 by John Pitts of Detroit.
We may have just seen its P2P equivalent.

1:30 min video of the SKY CAR roll-out

[go4reward]

Prosper is indeed went back to "quiet" period again. If you try to sign up as investor, you will see the official message.
http://www.prosper.com/help/topics/quiet_period.aspx

All of us are in "quiet" period again. 

Moderator Edit: Changed "quite" to "quiet"

[foofiter]

Just logged into my account today. Two new things have appeared:

1. New agreements including credit check
2. Address verification

I just did the agreements and they include a "soft" credit check to verify identity. They looked like pretty standard stuff most likely required by the SEC.

Only Issue I have is that it needs a utility bill. All the bills here are under my roommate's name. I am buying a house and moving in July so I guess it can wait until then. They will all be in my name at that point. I suppose I could write them and see if they will accept my lease as well.

Anyone else see this? Thoughts?

Foo

[Investar]

Just logged into my account today. Two new things have appeared:
1. New agreements including credit check
2. Address verification

Anyone else see this? Thoughts?
Foo

Yes. This unusual activity affects all borrowers, lenders (and future note traders) in the state of Georgia. No other states have seen these requirements thus far .. .. except California. Your re-registration protocol is the same one California residents had to complete in order to participate on the mini-Prosper. Interestingly, the Prospectus you "agreed you received electronically" IS that very California mini-Prosper prospectus that was effective for two weeks

[go4reward]

Yes, you are quite right, Investar. I am from Maryland, I did not see the new protocol request by Prosper fro my account. Perhaps GA and CA are the only states are ready for prime time.