The Financial Services Consumer Panel has revealed it has written to the UK's regulatory body expressing concern that proposed changes to offshore regulations could "undermine investor protection".
In a move to make the London Stock Exchange (LSE) more attractive to private equity vehicles and those wishing to follow alternative investment strategies, the Financial Services Authority (FSA) wants to grant overseas investment companies with lighter obligations.
Yet the consumer panel fears that the proposals could leave consumers unprotected and vulnerable.
According to the independent panel, the FSA's stance could mean the reduction of protection measures such as the spread of investment risk; publishing of investment policy; prohibitions on substantial cross-shareholdings; and the independence of board members and investment managers.
Such protections are widely supported throughout the industry and have boosted investor confidence "in the wake of the splits crisis", the panel says.
John Howard, chairman of the Financial Services Consumer Panel said: "We think that, with its current proposal, the FSA is at risk of making a serious mistake that will be damaging for investors and damaging for the confidence of the market.
"Indeed, a consequence would be that there would be a lighter touch regime for the companies which pose the greatest potential risk for investors – a reversal of the FSA's normal risk-based policy," he added.
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