Treasury reverses FPO and FCA makes clear statement

FCA has confirmed that it and the industry implemented the changes to the HNWI exemption in the FPO on 31 January, as required by a change in the law which in turn followed detailed consultation and recommendations from the Treasury Select Committee.  In the light of the new Government announcement, FCA has reminded that the UK definition of a high net worth investor is an international outlier. It has also previously suggested that the criteria for “sophisticated” investors needs tightening to minimise the risk of ordinary investors being able to classify themselves as sophisticated – and end up buying unsuitable investments.

It now says it will continue to work with the government on how to strengthen the regime to avoid consumer harm while making sustainable sources of investment available for business.

The announcement comes the day after the Budget announcement, as a result of which the government has quickly made a new statutory instrument to reverse some of the higher criteria only just set. From 27 March:

  • the annual income condition for HNWIs goes back down to £100,000, and the net assets condition to £250,000;
  • for SCSIs, the condition relating to having been a director of a company reduces the company turnover to £1m, and an individual can be an SCSI if they have made two or more investments in an unlisted company in the two years prior to the date of the statement.

The explanatory memorandum states that the technology, angel investing and theatre sectors have complained that the higher limits that had just been set could affect the ability of start up businesses to get investment, and of theatres to finance theatre productions through small scale investors.

The changes have been made with no consultation, although the increase in the limits had been consulted on and agreed by most respondents.

Emma Radmore