UK financial regulator looks at removing social investment barriers

Financial Conduct Authority launches consultation process

The UK’s Financial Conduct Authority (FCA), the financial industry regulator, has this week launched a consultation on regulatory barriers to social investment, a move that has been welcomed by Big Society Capital, the UK’s £351m (€497.4m) social investment wholesaler.

In a ‘call for input’, the FCA asks six questions, including whether financial advisers have experienced problems advising investors on social investment, whether consumers have appetite for retail social investment products, and whether social enterprise are interested in raising capital.

The consultation could lead to changes around protections for consumers when making social investments. Current strict financial regulations protecting consumers mean it is burdensome for UK charities to ask supporters to make a social investment.

Christopher Woolard, director of strategy and competition at the FCA, said: “The social investment market is developing quickly and regulation needs to keep pace. We want to explore the impact of our regulation to ensure it isn’t inappropriately restricting growth but continues to protect investors.“Reacting to the consultation, Simon Rowell, Strategy & Market Development Director at Big Society Capital, said the move was “timely and welcome”.

He says: “Existing financial regulation was set up many years ago, well before the concept of social investment became more widely known. As a result, it fails to recognize that not every investor is the same – we don’t all invest purely by considering financial risks and returns… This call will allow space for proper consideration of how regulation can take account of the broader reasons for investment by investors.

“There is enormous potential for charities and social enterprises to raise investment from members of the public who believe in their cause. Removing some of the barriers that currently prevent this will help many organisations increase their impact on society.”

The consultation ends on March 14 2016.

It comes as the UK government is legislating on creating a statutory power of social investment for charities, which enables charities to invest for lower financial return or higher risk where this advances the purpose of the charity. Link