UK financial services regulatory consultant, Bovill, regularly presents on FCA compliance issues faced by financial services firms. These slides are from Gillian Roche-Saunders's presentation at the Enterprise Investment Scheme Association (EISA) technical seminar held in Sheffield in February 2014. In them, she covers EIS options including UCIS, changes this year around AIFMD and non-mainstream pooled investments and regulation and crowdfunding.

1. Regulatory developments for
early stage investments
EIS Association Technical Seminar, Sheffield
Presenter: Gillian Roche-Saunders, Head of Venture Finance
February 2014

2. EIS options
Single company raise
Fund: UCIS
Discretionary managed portfolio
Fund: Non-UCIS
End result: shares allocated to investor

3. Changes this year
Alternative Investment Fund Managers Directive – May 2013 response from EISA
Regulating fund managers and promoters in the EU.
What is an AIF?
A collective investment arrangement that raises capital from a number of investors and
has a defined investment policy.
When is an EIS arrangement caught?
• Fund structure rather than individual portfolio, in other words:
• Collective portfolio management
• Buying / selling shares together
• Voting rights exercised together
What is the impact?
• Limited for sub threshold managers
• Significant for full scope managers
• EIS Funds that are AIFs can be the client of the Fund Manager.

4. Changes this year
Non-mainstream Pooled Investments
Restricting sales of funds to retail investors – extending the UCIS ban.
Impact on EIS
• EIS & Seed EIS funds are not classified as NMPIs as long as they are not a UCIS
• Confusion likely to arise with intermediaries and investors
• EIS portfolios and direct shares are unaffected
Impact?
• There are some exemptions but more limited than before.
• HNWI and Sophisticated investor options but extra assessments to be done
• No longer option an advised sale route (where UCIS has been deemed suitable),
a current participant route (unless roll-over vehicle) or to those deemed
sophisticated and highly experienced.

5. General EIS tips
5
 EIS will not be suitable for everyone
 Sell the investment as well as the tax reliefs
 Understand the EIS structures and select appropriate
one
Our concern is that they may be marketed to consumers based
primarily on the tax incentives offered, with investors not fully
understanding the risks involved.
FSA Financial Promotions Industry Update, March 2011

6. 6
unregulated
Investment based platforms
equity and debt securities –
direct or indirect
Loan based platforms
“peer to peer” loans
made to receive interest
and repayment of capital
Rewards
based
Non-financial
reward
Donations
based
Giving money
in support
unregulated
regulated
regulated
Other developments: crowdfunding

7. Regulation & crowdfunding
Investment based
Restricting who can view a pitch to professional clients unless:
• Sophisticated Investors or High Net Worth Investors (with a pre-
assessment) *
• Advised or managed sales
• Retail investor limits unlisted shares/ debt securities to 10% of
their net investable portfolio *
* Appropriateness assessment is also required by the platform
Loans based
Including Business to consumer and consumer to business loans
• New FCA permission: “operating an electronic system in relation
to lending”
• Interim permission for firms with valid OFT licence

8. Speaker Profile
8
Gillian Roche-Saunders
Consultant
T. 020 7620 8457
E. groche-saunders@bovill.com
Gillian’s key focus is supporting firms that arrange early-stage finance to
companies with regulation. She heads up our Venture Finance team and
manages our relationships with EIS and venture capital fund managers as
well as crowdfunding platforms and corporate finance advisors.
Her experience includes evaluating new products, reviewing financial
promotions, preparing firms for FCA authorisation and providing advice
and training on everything from financial crime to complaints handling.