Essential Briefing: UK financial services regulatory risks for property developers and property professionals
This briefing is for property developers and property professionals anyone else involved in the sector, who is not already authorised and regulated by the UK FCA.
26 February 2018
This briefing is for property developers and property professionals – including property agents, investors, lawyers and anyone else involved in the sector, who is not already authorised and regulated by the UK Financial Conduct Authority (FCA). Its purpose is to keep you, your clients and business partners out of trouble – by enabling you to spot issues which could lead you to fall foul of UK financial services regulation if you don’t tread carefully.
You might think that you won’t be caught, but if your plans include continuing to build a business in the UK, you will want to protect your reputation and play by the rules.
Here are some of the main areas you need to look out for:
Communicating financial promotions
It is a criminal office to “communicate an invitation or inducement to engage in investment activity” unless certain exemptions apply. Real estate is not caught by this offence, but shares and loan notes are. There are also special rules about promoting “collective investment schemes”.
Advising on investments and arranging deals in investments
These regulated activities could cover, for example, circulating a summary of an investment opportunity and introducing an investor and investee to each other. Again, real estate as such is not regarded as an investment for these purposes. However, shares in an SPV or units in a collective investment scheme would be.
Operating a collective investment scheme
A collective investment scheme (CIS) is any set of arrangements where:
two or more investors participate in profits or income from property of any kind;
the investors do not have day to day control; and
the investors’ contributions and the profits or income due to them is pooled, or the property is managed as a whole.
Establishing, operating or winding up a CIS are controlled functions and therefore an FCA-authorised person must be appointed to operate any CIS. The promotion of collective investment schemes is also tightly regulated.
Managing an Alternative Investment Fund
The concept of an Alternative Investment Fund (AIF) is similar to that of a collective investment scheme, but wider in reach. Unlike a CIS, it includes corporate vehicles. The manager of an AIF must be registered with the FCA
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