More on savings pools

Legislation applicable to savings pools

Depending on how a savings pool operates, it might need to comply with some or all of the statutes listed below.

  1. If the Savings Pool is carrying on a business of providing or offering to provide a financial service (providing loans is a “financial service") then the Savings Pool needs to register as a financial services provider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
  2. If the Savings Pool undertakes financial activities in the “ordinary course of business” it might be required to comply with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
  3. A loan is a “credit contract”. The Credit Contracts and Consumer Finance Act 2003 could apply if the lender (the Savings Pool via its members) carries on a business of providing credit.
  4. Members of an existing Savings Pool, or people proposing to form a Savings Pool, could be “financial advisers” for the purposes of the Financial Advisers Act 2008 if they provide financial advice “in the ordinary course of a business".
  5. Savings Pool members – particularly the persons in whose name the Savings Pool’s bank account is held, and who hold the funds on trust for the members – could be subject to broker provisions of the Financial Advisers Act 2008, and also to the Financial Advisers (Custodians of FMCA Financial Products) Regulations 2014, if they are carrying on a business of providing or offering to provide custodial services to a client.
  6. Last, but not least, the Financial Markets Conduct Act 2013 could apply if a Savings Pool has not ensured that each member’s funds are held on trust for the relevant member. (If each member’s funds are not held on trust for the relevant member, the pooling of members' funds could be regarded as the issue of debt securities by the Pool, which would then have to comply with the disclosure obligations in the FMC Act unless it could rely on one of the available exemptions. There are exemptions for offers to relatives and close business associates, and – so long as certain conditions are met – for “small offers”, but even if it can rely on those exemptions, the FMC Act will restrict how a Savings Pool can operate. Accordingly, each Savings Pool should seek its own legal advice, and ensure that whatever amount a member pays into the Pool’s account – excluding any loan repayment – remains owned by that member.)

Living Economies Educational Trust (LE) promotes exchange systems and investment models that build community strength and well-being, offer interest-free alternatives to 'business as usual', and respect both people and our living planet. Our network of volunteers can recommend resources and provide educational support for community initiatives. LE (CC 38114) is a registered educational charity, and we do not provide financial or legal advice.

© 2018 Living Economies