The long-awaited policy decision by the Financial Conduct Authority on the controversial CP 12/19 consultation paper could open the doors to up to GBP2.5bn worth of investment into Enterprise Investment Schemes (EIS) each year, according to investment specialist Kuber Ventures.
The paper, which was created in August 2012 and proposed a ban on the promotion of Unregulated Collective Investment Schemes (UCIS) to retail investors, came off the back of FSA research which showed that some investors were being exposed to unreasonable levels of risk. However, the paper caused much confusion in the market as there was a severe lack of clarity around which products would be included under the ban.
Dermot Campbell (pictured), managing partner of Kuber, the industry’s first multi-manager EIS fund platform, says: “The uncertainty that we have experienced over the last six months has had a critical impact on EIS fundraising. In fact, we estimate that for every adviser who recommended EIS there were another five who didn’t due to concerns about the outcome of the FCA’s decision.
“The FCA’s announcement has finally silenced all the negative noise and the market can now start to focus on the business at hand.
“Financial advisers can have the confidence to promote EIS to suitable clients; small businesses can be made aware that there is a way to secure much needed funding; and retail investors, currently struggling to find returns, can benefit from the compelling tax incentives that EIS offer.”
Since the mid-1990s EIS and VCT have raised over GBP13.3bn to over 20,000 companies and in 2012/13 financial year alone, GBP500m was raised through EIS portfolios via the retail market. Kuber expects the FCA’s announcement will have a dramatic impact on growth of the sector and stimulating the UK’s economy.
Campbell says: “It is important that the industry now starts making up for lost time, highlighting the importance of EIS to small businesses and investors alike.
“At a time when options for capital raising are extremely limited for small businesses and the UK economy is in desperate need of growth, EIS is a fundamental solution and needs to be fully promoted and regulated, not pushed back into the pre-RDR dark ages.”
