Regulation is not preventing the social investment market from developing, according to a feedback statement published today by the Financial Conduct Authority.
It stated that its call for input found regulation was not placing inappropriate barriers to the sustainable growth of the market for social investments.
But the regulator added it does not, as a point of principle, believe that social investors should receive less protection than other types of investor.
The call for input stated financial advisers need time to understand this growing market in order to advise clients, but there is nothing in current regulations that prevent them from doing this.
Additionally, the social investment market is still in its early stages, the regulator noted, and it believes appropriate consumer protections are important if investors are to have the confidence to invest.
The FCA concluded rules around advice and suitability ensure that socially-minded investors benefit from the same protections as other investors.
It added, however, responses suggest there may be misunderstanding of the role of the Financial Ombudsman Service among sections of the adviser community, which may be holding back recommendations to invest in social enterprises.
The FCA plans to tackle this issue by working with the Financial Ombudsman Service to clarify for advisers and their professional indemnity insurers to clarify the type of complaints they may consider and how they will be approached.
Justin King, a chartered financial planner with Dorset-based MFP Wealth Management, said: "From my perspective, the difficulty with this type of social investing or ethical investing is that anything slightly esoteric or the mainstream means client don't benefit as much because funds would be more concentrated.
"If someone was steered towards social investing I would probably refer them to a specialist."
ruth.gillbe@ft.com
