If retail investors are important to your business model you may want to answer the FCA’s newly released Call For Input on the Consumer Investments Market. At the heart of this paper is the questions of how the FCA should strike the balance between consumer choice and consumer protection and views from all stakeholders are being sought.
The paper takes a systemic approach to looking at the issues that need to be fixed. The answers received are likely to influence the direction of the travel and create the baseline thinking for a range of initiatives and investment sectors.
If your firm offers unlisted equity, project finance, real-estate or any other investment that the FCA views as high-risk investments, chapter 4 will be of particular interest. Diversification, capacity for loss and the high-net worth and sophisticated investor regime are among the areas of focus in this chapter.
The paper shares many of the real challenges the regulatory needs to address. TFor example, the FCA points out that consumers only start to recognise an investment product is probably ‘too good to be true’ when the promised rate of return is around 30%. This is in stark contrast to the FCA view that a bond with a return of 5% and above carries a significant risk of loss. How can they bridge that gap so that they don’t feel that they need to protect investors from themselves?
The Call for Input is open for comments until 15 December 2020. We would certainly recommend you take the time to share your thoughts.