Why is the Community Shares Standard Mark valuable?
Societies promoting the public sale of withdrawable share capital are exempt from financial promotions regulations, but are still subject to general law. In the absence of statutory regulation it is difficult for societies to know precisely what is expected of them, or to demonstrate that they are engaged in good practice. The Mark fills this gap by setting standards of good practice. It is a voluntary form of self-regulation, based on an independent assessment by a licensed practitioner. This assessment acts as a final check on the quality of a community share offer before its public launch.
The Mark is designed to promote public confidence in community shares. It also provides confidence to societies and their management committees, to commercial lenders, social investment financial intermediaries and public funding agencies.
A Standard Mark assessment is useful for a society as it means that an independent third party checks the share offer document. It is especially useful for potential investors to see that a share offer has been awarded the Standard Mark as this is an unregulated financial environment and so societies need to instill as much confidence as possible in their supporters to invest.
The Community Shares Unit will only promote share offers that have been awarded the Standard Mark, plus if a society chooses to use an online platform to raise investment, some platforms give a service charge discount to Standard Mark awarded share offers.
What is a licensed practitioner?
A licensed practitioner is someone who has been assessed by the CSU as being competent to assessment a society’s share offer, and licensed to award the Mark on the CSU's behalf.
Practitioners have a wide variety of backgrounds, but all are experienced in community share offers. They might be board members, technical advisers, business plan developers or share offer document writers. Some may be experts in a particular trade sector, knowledgeable about society law, or experienced in community engagement. Whatever their background, experience and expertise, they are all committed to the principles of good practice and independent assessment, and value the contribution a second opinion can bring to the development of high quality share offers.
The CSU maintains a directory of licensed practitioners, detailing which societies a practitioner has worked with, and the services they provided. Licensed practitioners are required to sign up to a code of practice, which includes participating in an open complaints procedure, giving both their clients and the general public the right to complain about a share offer or the work of a licensed practitioner. Under the code the CSU has the ultimate sanction of removing a practitioner’s license.
How do societies obtain the Mark?
The Mark is available to any society planning to make a public share offer. Societies are asked to submit their offer document, application forms, business plan and governing document for inspection by an independent licensed practitioner who will assess the offer using the Community Shares Standard Mark assessment tool. Detailed feedback will be given on this assessment, with the option of revising and resubmitting any documents that don’t meet the Community Shares Unit’s standards. Share offers that meet the standard are awarded the Mark, and entered on the CSU’s public directory of share offers.
Societies are free to employ a licensed practitioner, and to agree their own terms with this person. The licensed practitioner is responsible for ensuring that the terms of any work agreement avoid any conflicts of interest that would undermine the principle of an independent assessment.
A Standard Mark assessment for a society that plans to raise between £50,000 and £250,000 in community share capital will normally take between one and two days for the first assessment, plus a further half or whole day for assessing any subsequent revisions to the documentation. This does not include any face-to-face meetings between the practitioner and the society, or the provision of any other ongoing advice, support or mentoring, all of which should be negotiated separately.
The Standard Mark is awarded to the share offer, not the society, and remains valid for the period of that offer. Any changes to the share offer or its supporting documentation should be approved by the licensed practitioner in order to retain the Mark.
How much does it cost?
Licenced practitioners and societies should agree terms for meeting the cost of the assessment service leading to the provision of the Mark. The CSU monitors the work of licensed practitioners and is responsible for verifying all decisions to award the Mark to a specific community share offer. This service is currently provided free of charge. Periodically, there may be funding available to societies to cover the costs of the Standard Mark assessment.
What happens once an offer is awarded the Mark?
The Mark can be prominently displayed in a society’s share offer literature and on electronic documents it can be hyperlinked to the Community Shares Standard Mark website, which contains a simple guide to community shares and the Mark.
Societies awarded the Mark are required to sign up to a code of practice, which includes participating in an open complaints procedure, giving their members and the public the right to complain about the share offer. Under this code, the Community Shares Unit (CSU) has the ultimate sanction of removing the Mark from a society’s share offer.
The Mark is not a form of professional due diligence. It does not vouch for the success of a share offer, any financial forecasts contained within that offer, or the capabilities of the society making the offer. Responsibility for the contents of the offer document rests with the society and its management committee. By obtaining the Mark societies are showing that they have embraced the CSU’s standards of good practice and are open to independent scrutiny.