27 June 2005
Business Angel-Led Enterprise Capital Funds: a consultation on proposed changes to the Regulated Activities Order
Government Response Statement
About the Consultation
‘Bridging the finance gap: next steps in improving access to growth capital for small businesses’ announced the Government’s intention to launch a pathfinder round of Enterprise Capital Funds ("ECFs"). One of the objectives of the pathfinder is to test the appetite for ECFs amongst groups of business angels seeking to manage their own funds.
Recognising that regulatory compliance costs may discourage groups of business angels from submitting bids for ECFs, this consultation sought views on proposed changes to the rules on exemptions from financial services regulation in order to exempt the operator of a Business Angel-led Enterprise Capital Fund (“BA-led ECF”) from such regulation when carrying out certain activities specified in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), as amended.
The Government received 12 formal responses to the consultation and has engaged informally with further interested stakeholders. The majority of respondents were in favour of the Government’s proposed policy and agreed that suitably qualified individuals should be allowed to manage their own, and the government’s funds, through a BA-led ECF without having to be authorised by the Financial Services Authority. Potential investors in a BA-led ECF will be aware of this situation and its possible implications.
The Government is grateful to all who have spent time and effort in responding to this consultation.
Government Response
Following the Government’s assessment of responses to the consultation, it has decided to proceed with the following proposed changes to the Statutory Instrument:
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the addition of an exemption for advice on investments to be made by or on behalf of the participants in a BA-led ECF;
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an additional article to broaden the definition of “a limited company”;
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the inclusion of self-certified sophisticated investors in the list of participants of a BA-led ECF; and
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the amendment of the definition of “high net worth company”.
The Statutory Instrument amends the Financial Markets and Services Act 2000 (Regulated Activities) Order 2001. The Statutory Instrument has been laid before Parliament and comes into force prior to the launch of the ECFs bidding process on the 1st of October 2005.
To find further information on Enterprise Capital Funds and updates on the bidding process click here.
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Internal links
Media links
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PDF file of Explanatory Memorandum (external website)