By Andrew Holt
A ‘Social Finance Regulator’ should be established as well as new laws to open up social investment, said Law firm Bates Wells and Braithwaite (BWB) in a new report Investing in Civil Society, published today.
BWB and the National Endowment for Science, Technology and the Arts (NESTA) call on the government to implement a bespoke regulatory framework for social finance.
They state that, whilst government is currently setting out reforms to the Financial Services Authority, it has failed to consider the need to create a legal and regulatory regime to address the needs of the emerging social investment market.
Investing in Civil Society recommendd how a social finance legal and regulatory regime could be established that would help the government achieve its ambitions of growing the social investment market and making the Big Society Bank a success.
The report notes that it is "perverse that members of the public are largely free to give donations to charities and civil society organisations but are effectively prevented from supporting the majority of civil society organisations by means of investment".
Luke Fletcher, an Associate at BWB who authored the report, said: "If the Big Society Bank is to leverage more private monies into the social investment space, the hands of ordinary individual investors need to be untied."
Responding to Investing in Civil Society, the Social Enterprise Coalition’s chief Executive, Peter Holbrook, said: “We wholly back the report’s call for a regulatory framework for social finance. We don’t want a situation where we’ve got investors ready, but a gap in the law that would barricade finance from flowing through. Civil society can’t afford that delay – capital from private investors is urgently needed.
“This is an opportunity for Government to demonstrate their commitment to civil society and show they’re serious about creating a Big Society. Swift action is required to lever in this capital otherwise civil society will be starved of the finance it needs.
“It would be very disappointing if the Government did not action some of the recommendations in this report which have been endorsed and recommended by the Red Tape Task Force.
“The doors need to be opened to allow the general public to put their money into social enterprises and charities. Here’s an opening to grow the number of ethical investors in the UK - people who want to see more from their investment than just a financial return - and direct the capital into the Big Society Bank.”
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