FCA consults on restrictions on the retail distribution of regulatory capital instruments
The Building Societies Association has given a qualified welcome to the proposals issued today by the Financial Conduct Authority in relation to the distribution of mutual society shares.
These proposals are a great improvement on the crude approach originally imposed by the FCA and draws heavily on the suggestions made in July by the BSA. Societies should be allowed to issue CCDS now under the proposed distribution restrictions, minus the minimum denomination approach which should be ditched.
We totally agree with the core underlying principle that anyone, and in particular ordinary retail customers, investing in mutual society shares must be completely clear about what they are investing in. These instruments are totally different to a retail savings account and by their very nature whilst the rewards could potentially be greater, capital is at risk.
We are now working through the details of the entire consultation and will respond to the FCA shortly.
Commenting, Jeremy Palmer, Head of Financial Policy at the BSA said:
“Particularly with the rise in popularity of retail investment in peer to peer and crowd funding it is strange that until now the one group unable to invest in a building society’s capital are their own members. These proposals go a long way towards changing the situation, although the crude minimum denomination must be ditched now. Clearly the processes and communication surrounding such an investment must ensure that an individual is crystal clear what they are buying into and that they don’t bet the ranch.”
The FCA consultation paper can be found here.
The FCA press release can be found here.