FCA consults on patient capital and permitted links

Following the Patient Capital Review on regulatory barriers to investment in illiquid “patient capital” assets FCA is consulting on:

  • changes to the COBS 21.3 permitted links rules to enable retail investors to invest in patient capital through unit-linked funds and
  • more generally on how UK authorised funds can be used to invest in patient capital.

The proposed changes to COBS clarify FCA’s expectations on areas where interpretation of the rules is proving a barrier to patient capital investment and add conditional permitted links categories that will, for example, allow greater scope for investment in permitted infrastructure projects.  But investor protection will be maintained by a new limit that will require that no more than 50% of total assets for firms meeting the new conditions should be composed of investments in illiquid assets.  So firms will be able to exceed current limits for overall permitted links categories but not the overall threshold. FCA also proposes safeguards to ensure any investments made are suitable and appropriate. The accompanying discussion paper seeks views more widely on whether the UK authorised funds regime gives appropriate access to patient capital investments while maintaining the right levels of investor protection. FCA is also considering creating a new type of authorised retail fund that could invest all its capital directly into patient capital assets.

Consultation closes on 28 February 2019.


Barry Stimpson