Is regulation working in social investment? FCA seeks answers

The Financial Conduct Authority (FCA) in the UK is calling for contributions on how regulation is working in the social investment market.

The FCA describes social investments as those ‘where the aim is to provide a wider social benefit, rather than the primary driver being a purely financial benefit to investors’. 

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."

The FCA is calling for input from social entrepreneurs who have tried to raise capital, financial advisors recommending social investments and views about the potential risks to consumers investing in this sector.

Bertrand Beghin, co-CEO of social investment intermediary Numbers for Good, said in response to the call: "We welcome the FCA's request for views on social investment. 

"Effective regulation is going to be crucial in enabling social enterprises and charities to access social investment and to attract new organisations and individuals to invest socially. With increased interest in the market, it's crucial for FCA to explore how fiduciary duty aligns with social impact. In an emerging market there needs to be a balance between supporting its growth and protecting investors and it's really good that the FCA recognises this."

Gavin Francis, director of the social investment consultancy Worthstone also commented: "The FCA's call for evidence is an important step forward. From the retail investment advisers perspective it will bring clarity to the genuine regulatory barriers so that all we will be left to deal with is tackling the excuses.”

After examining the contributions it is offered, the FCA will consider whether it is necessary to clarify the requirements that apply to social entrepreneurs and the protection available to consumers for social investments.

The FCA requests all comments are submitted by 14th March 2016. For more information, please click here.

To read the reaction to the announcement of Theresa Burton, a leading figure in the UK social enterprise and crowdfunding sector, please click here. 

Photo credit: Drew Patrick Miller