Regulating Social Investment

News

09.02.2016

1. Background

The FCA recently issued a Call for Input: Regulatory Barriers to Social Investments (Call for Input). The Call for Input follows up on the FCA’s commitment to consider the social investment sector further as a result of its work on crowdfunding platforms. The FCA believes that there is a growing amount of investment activity in this market, which is currently estimated at £200m. The FCA is interested in this market as a number of capital raising activities by social enterprises do fall to be regulated by the FCA. For example, the FCA has a regulatory stake in:

unlisted equity or debt securities issued by social enterprises;
units issued by unregulated collective investment schemes; and
crowdfunding initiatives.

2. Call for Input

The Call for Input is focused on the barriers to retail investing in the social enterprise sector. While it is difficult to assess the public appetite for investing in charities or other social enterprises, it is welcome to see the FCA asking for input on this topic.

The Call for Input summarises the current regulatory framework for (1) setting up; (2) raising capital in; and (3) investing in social enterprises. The Call for Input also considers how and to what extent such investments are currently protected including to what extent the Financial Services Compensation Scheme and the Financial Services Ombudsman can be used by participants in this market.

Commenting on the launch of the Call for Input, Christopher Woolard, the FCA's director of strategy and competition noted that the FCA is keen to ensure that regulation "isn't inappropriately restricting growth but continues to protect investors".

In order to achieve this balance the FCA is asking for feedback from relevant parties such as social enterprises, financial advisors and consumers in the social investment market for their views in relation to issues faced trying to raise capital, advise clients on such investments and/or barriers consumers (or consumer groups) have found trying to invest in this sector.

3. Next steps

The closing date for responses to the Call for Input is 14 March 2016, after which the FCA will review the feedback it receives and consider what action it may need to take.

If you require further information on anything covered in this briefing please contact Fiona Lowrie ([email protected]; 020 3375 7232) or Elizabeth Jones ([email protected]; 020 3375 7138) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.