European Commission should relax social investment rules, consortium says

Working group welcomes commission consultation but argues that strict rules on how investments are sold threaten to exclude retail investors

European Commission
European Commission

The European Commission must relax the rules around social investment to make it easier for ordinary people to become involved, a consortium of social investment bodies in the UK has said in response to a commission consultation.

The consultation, entitled The Social Business Initiative: Promoting Social Investment Funds, closed last week. It is part of a plan to create a new European Commission "social business initiative". The consultation asked for views on whether existing European investment fund rules work well for social businesses, and what improvements would help the sector.

The UK working group, which included representatives from Big Society Capital, Social Enterprise UK and the National Council for Voluntary Organisations, said many things needed to happen before the commission developed complex rules to govern social investment.

"We broadly welcomed the initiative," said Luke Fletcher, an associate with Bates Wells and Braithwaite, who wrote the submission on behalf of the working party. "It shows a good understanding and a reasonable amount of thought. However, we think the commission might be running before it can walk."

He said that the social investment market was at a very early stage, and that there were other, more important priorities to help social business than an EU framework for social investment."One thing we’d like to see is the relaxation of rules around retail investment in social issues," he said.

At present, he said, it was difficult for ordinary people, or "retail investors", to get involved in social investment because of strict rules governing how investments are sold.

"The White House recently said it wanted to create exemptions for crowdfunding to make it easier for ordinary people," said Fletcher. "We want Europe to do something similar."

He said his working group had recommended the creation of a social business unit in the commission, so it could ensure that the future needs of social enterprise and social investment were considered fully.

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