Investing In Civil Society - UK Report
7 July 2011 at 1:33 pm
There is a serious need for tailor-made laws and regulations to recognise the special characteristics of social and community finance investment offerings and activity in the UK, according to a new report.
The report called Investing in Civil Society by Not for Profit financial experts NESTA and UK law firm Bates, Wells and Braithwaite says there has been no attempt on the part of the UK Government to create a tailor-made regime for community and social finance activity.
The report sets out how a proportionate social finance legal and regulatory regime could be established, to enable the Government to achieve its policy objectives of growing the social investment market and making the Big Society Bank a success.
NESTA is described as the UK’s independent expert on how innovation can solve some of the country’s major economic and social challenges. It is funded by the National Lottery, and it operates at no cost to the government or taxpayer.
The report says the activities of social financiers sit uneasily between, on the one hand, the world of charity, social enterprise and community action and, on the other hand, mainstream financial services and unfortunately, there is currently no such thing as ‘the law of social finance’.
The legal form of the community interest company was made available in the UK on 1 July 2005 and addressed the need for a tailor-made, by definition, non-charitable social enterprise in a company form. There has been a rapid take-up – already, over 4,700 have been incorporated – and community interest companies now form an essential part of the social enterprise movement.
In the same way, the report says there is a serious need for law and regulation to recognise the special characteristics of social and community finance investment offerings and activity.
The report makes a number of recommendation to the UK Government including:
- The Government should issue a consultation on proposals to establish a bespoke regime for community and social finance, in the form of a stand-alone piece of subordinate legislation to the soon-to-be-amended Financial Services and Markets Act 2000, concerned solely with community and social finance activity (the ‘Community and Social Finance Order’).
- The proposed Community and Social Finance Order should set out a co-regulatory framework, involving the establishment of new community and social finance standards boards which would include representatives of the community and social finance sectors, to set mandatory and best practice standards for community and social finance
- A new independent office-holder should be established to oversee the co-regulatory framework set out in the proposed community and Social Finance Order, to review and approve the practice standards articulated by the proposed Standards Board and to act as a registrar for community and social offer documents (the ‘Social Finance Regulator’).
The full report can be downloaded at http://www.nesta.org.uk/library/documents/InvestingInCivilSoc.pdf