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the aic s vct agenda

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    1. The AICs VCT agenda Guy Rainbird Public Affairs Director, AIC

    3. Political challenges and opportunities! Austerity government and severe cuts inevitable (whoever won!) Competition from other schemes (e.g. EIS) Some query if dedicated schemes are the best way to support enterprise, but Consensus about contribution of SMEs to job creation and raising the long term economic growth rate Concern about withdrawal of banks from lending to SME sector

    4. Making the political case VCTs represent an existing network of finance and skills They draw on an otherwise untapped pool of finance They are cost-effective intervention because of the level of the relief, role of the market and the additional revenues they support They have a track record of investment in many sectors across the UK They have created jobs, supported R&D and exports etc Securing ongoing political support will underpin all other AIC activity

    5. Securing the best possible VCT rules Scope of eligible investments for newly raised funds have been altered by demands of securing State Aid approval AIC has worked closely with officials to ensure European requirements introduced with minimum disruption Also responded to proposed targeting measures (and delighted that our serious concerns about using SME definition were recognised) Rules expected in impending Finance Bill

    6. Future State Aid developments Rolling back recent State Aid restrictions a key ambition Success will require changing Commission view on market failure in SME financing Government invited evidence to argue for increasing: - employee limit to fewer than 100 or 250 full-time employees - gross assets limit to 15m before investment (and 16m after) - annual investment limit to 5m per target company, and - considering the effectiveness of gross assets as a proxy for company size

    7. Developing this agenda Secure a continued commitment from HMT to pursue this agenda Explore what evidence may be required and how the AIC (and its stakeholders) can mobilise data to develop the arguments First need to persuade the Government to take the case to Europe, then need to convince the Commission Success unlikely to come overnight

    8. The regulatory threat Sea change in political and regulatory attitudes since banking crisis Europe seeking to tackle systemic risks - but AIFM Directive catches VCTs in the regulatory net! Proposals undermine the corporate structure (e.g. prevent share issues and undermines role of board) Also create significant regulatory obligations (e.g. depository, valuation, disclosure, authorisation etc)

    9. AIC approach to AIFM Directive Calls for complete exemption fell on deaf ears Alternative is to apply the obligations to the company (similar to company law, Prospectus and Transparency Directive etc) Manage compliance burden by targeted derogations which limit obligations for smaller funds If successful, VCTs will only have to register with competent authority and comply with some disclosure obligations a major victory! This outcome depends on current political negotiations

    10. Positioning VCTs in evolving market Retail distribution review will reshape financial services market Will end commission payments by product providers Independent advisors will have to make recommendations based on a comprehensive analysis of the relevant market Intermediaries no longer able to focus only on open-ended funds Investment companies (including VCTs) should be part of the mix

    11. Implications of RDR Difficult to predict precise impact of change Will advisors want to retain the independent tag? Where will VCT investment sit in the analysis of relevant market? How will platforms respond? The challenge is to retain and extend advisor recommendations

    12. AIC response to RDR Creating an environment which will encourage advisors to consider investment companies including VCTs Providing industry statistics Increasing the quality of investment company data on major consumer sites

    13. Improving online information Seven sites now offering high quality investment company data

    14. AIC response to RDR Creating an environment which will encourage advisors to consider investment companies including VCTs Providing industry statistics Increasing the quality of investment company data on major consumer sites Raising PR profile (VCT journalist roundtables, press releases etc) Lobbying on implementation and providing guidance as required

    15. A full agenda AIC will continue its focus on major VCT projects Highlighting the continued relevance of the VCT scheme Seeking relaxation of European constraints on policy development Tackling intrusive regulation (and advising on rules which do apply) Responding to changing distribution landscape Keen to hear your views to make sure best outcome for VCTs achieved