Investors' Chronicle quotes Charlotte Hill on the legalities surrounding investment clubs for retail investors
min readInteractive Investor's decision to close investment club accounts has sent shockwaves through the UK's investment community, as it was one of the few major platforms still supporting such clubs.
The closure, announced after a strategic review with a deadline of 27 October, has left many clubs scrambling for alternatives. Interactive Investor has offered options for clubs to manage their portfolios, but many members feel the reasons for closure remain unclear, questioning whether anti-money-laundering regulations or administrative burdens were factors.
Charlotte Hill, Partner in the Financial Services Regulation & Funds team, speaks to Investors' Chronicle and highlights the complexities of potential workarounds for investment clubs considering restructuring as small private companies or LLPs.
It is important to remember that the company is the legal owner of the investments, not the individuals, so members need to be clear about how shares in the company are allocated, and what happens if someone wants to leave. The flexibility of an investment club can be lost if the corporate machinery is not set up carefully.
That said, investors should bear in mind that trying to run a club without an appropriate structure in place is fraught with difficulty.
Without clear rules on ownership and decision-making, disputes are almost inevitable. There are also statutory pitfalls: if the arrangement starts to look like a collective investment scheme, it could fall within the scope of Financial Conduct Authority regulation, which is not designed for casual investor groups.
Read the full piece in Investors' Chronicle here.
