Michael Jackson Santa Barbara Sheriff's Dept.

With apologies to Michael Jackson on the day following his memorial service, it’s hard not to compare the embattled and quirky king of pop to the erstwhile king of P2P lending, Prosper, who continues working day and night to amend its regulatory filings with the SEC. On June 26, Prosper filed yet another amendment (this one makes it five) to their S-1 in the hopes of reopening the US’s first social lending marketplace with the SEC’s blessing.

This S-1 comes less than a month from Prosper’s fourth S-1 amendment on June 1. Does the proximity of this amendment indicate that we’ll see Prosper re-launch with SEC approval any time soon? No idea. Prosper is approaching boy who cried wolf status with their SEC filings.

This filing seems to have been made to publicize the indenture that Prosper arranged with Wells Fargo Bank on June 15 to act as a sort of proxy regulator for lenders. In the filing, mentions of the indenture have been updated to add “indenture, which would include Prosper becoming subject to a bankruptcy or similar proceeding”. Prosper’s filing package with the SEC also includes a securities opinion from lawyers at Morrison Foerster stating that the indenture is legitimate and that securities issued under it will be “valid and binding obligations of the company”.

So what else is new? It’s no thriller. Here’s a rough list of changes from the last filing:

  • Prosper will lower the minimum bid amount from $50 to $25, matching Lending Club‘s $25 minimum, and getting closer to Loanio‘s planned $20 bid minimum.
  • Borrower loan listings will be extended from 7 days to 14 days.
  • Borrower income and employment verification seems to be a sticking point, as Prosper has revised its statements on this topic multiple times in multiple filings. To paraphrase: Prosper does not verify income or employment, so don’t rely on it when bidding.
  • To their loan repurchase policy, which covers lender losses in the case of identity theft, Prosper has added coverage in case a borrower’s Prosper score (their proprietary credit underwriting mechanism) is incorrect or mis-reported.
  • Prosper has revised the number of state lending licenses or authorizations that it holds from 23 down to 14. Either Prosper has let these licenses lapse during the quiet period, those states have revoked Prosper’s licenses since the SEC crackdown, or Prosper no longer meets the states’ requirements. Nonetheless, Prosper’s legal compliance page continues to show the 26 states in which Prosper is or was licensed.
  • Kirk Inglis, Prosper’s CFO, was also named Chief Operating Officer in June 2009.

What do you think? Is Prosper still a pretty young thing, or should they just beat it?

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