Regulation & Cost of creating a job

Gus1

Hi all,

Trying to work out if the following scenario would be classed as a regulated one and if so, what area it'll fall under (i.e. Investment Intermediary, Money lender etc). Cannot figure anything out from the Financial Regulator website and got no conclusions from emails and phone calls with their offices.

• Basically investors invest money into Company x at a % return over a no of years. This money is then used to lend to new and existing SME's. Is that in itself a regulated activity?

• Also, if Co x was to take some preference shares redeemable by a borrowing SME repaying their loan (preference shares are convertible to ordinary shares in the event of default) does this change things?

• Also, do any of you know any stats/estimate of how many jobs are sustained/created with an inflow of €100m into economy i'd appreciate.

Sorry if above appears vague, trying to help someone and hitting dead ends.

Cheers

antoinolachtnai

It depends how you would raise the money. If you had someone ready to put in the cash, then you might be able to do this without a lot of regulation. If you need to raise money from the public, then there is going to be an awful lot of regulation. If you are getting the money from a very small pool of select investors, then you might be able to avoid the regulation.

But really, you need to address these questions to professional advisors with experience in the area.

If you are dealing with other people's money, there is always going to be a lot of administrative overhead.

100m euros - Taking it at its most simple, assuming this is going into very labour-intensive businesses, like software - if you take an average yearly salary of 50k including PRSI, then that will directly generate 100m/50k = 2000 job-years. That's 500 jobs for 4 years.

Gus1

Thanks for your help. You're correct that if the money is raised in public, then there certainly comes under the Financial Regulator's jurisdiction.

The money is being raised from a fairly small group of investors (approx 20) but i still feel it'll be a regulated entity similar to a fund.

I will have to find some expert in this field as getting nowhere with the Central Bank/Financial Regulator's office

Thanks again

antoinolachtnai

At 20 investors, I don't really think you'll have too much bureaucracy, at least not regulation-wise. But you are going to run up a lot of accounting and legal bills. Millions of euros over the lifetime of the fund, realistically.

You do need professional advice, and lots of it. It is not really the job of the regulator to advise you.