The U.K. Financial Conduct Authority (FCA) on Monday published a discussion paper that aims to explore the impact of regulation investment opportunities that aim to produce a social return alongside financial returns.
The paper seeks feedback from: social entrepreneurs about their experience of raising capital; financial advisors on recommending social investments and the potential risks to their clients of investing in this sector; and individual investors themselves.
The FCA’s approach to regulating crowdfunding has caused some concern in the social investment sector, the discussion paper notes, and the U.K. regulators is seeking feedback about these, and other, potential regulatory barriers for social entrepreneurs.
The FCA paper examines the different corporate structures that can be used for social enterprises and how the FCA’s rules may apply. As well, the paper seeks input on specific rules or policies that may be hindering social investment, and it contemplates the appropriate retail investor protection, noting that it is important that retail investors appreciate the risks associated with these types of investments as they are likely to be less familiar with social investing products.
“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,” says Christopher Woolard, director of strategy and competition at the FCA, in a statement.
In addition to the discussion paper, the FCA also released videos and interactive graphics seeking to stimulate feedback. The U.K. regulator is seeking comments by March 11, 2016. The FCA will consider whether it is necessary to modify the requirements that apply to social entrepreneurs, or investor protection measures in this area, based on the feedback it receives, the FCA statement says.