Charities fear costs of new funds regulated by the FSA

Change to charity authorised investment funds 'will bring problems'

A proposal to replace charity-specific investment vehicles regulated by the Charity Commission with a new type of fund regulated by the Financial Services Authority would bring problems, charity investment experts have told the Treasury.

Respondents to a consultation said they were concerned about the potential cost, administrative burden and tax implications of replacing common investment funds and common deposit funds with a new model, the charity authorised investment fund, according to a summary of responses produced by the Treasury last month.

But most supported more regulation of charity-specific vehicles by the FSA, the Treasury said, although there was a feeling that the Charity Commission should retain a role.

"There is a long list of worries," said Michael Quicke, chief executive of specialist charity investment house CCLA, which responded to the consultation. "One key concern is that the charity authorised investment fund would not be a charity itself, unlike the CIF, which has several tax and governance implications.

"People are in favour of the move conceptually, but worried about a lot of practical considerations.

"I think this might end up in the 'too difficult to do' category for the moment, but it's been very interesting to carry out the exercise and see what's come out of it."

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