Law firm Stone King legal opinion on fundraising self-regulation

Leading charity Law firm Stone King have been spearheading a debate as to what trustees should be considering when assessing how to fundraise.

There are proposals for a new Regulator in the light of inappropriate fund raising tactics, but before that is formally set up, charities are already having to balance their fiduciary duties against pressures to amend their practices.

SK expose the myth that compliance with new regulatory requirements will be voluntary, and look at the issues for trustees both now, and when the new requirements become law. 

There are two proposals in play regarding current fundraising practice which could significantly affect charities’ fundraising income. The first is the Charity’s own “opt/in opt /out” procedure for obtaining consent to fundraising material being received, and the second is the proposal for a Fundraising Preference Service (FPS).

Stone King’s charity legal experts suggest that currently the opt in/opt out decision is one for the charity to make, whereas future compliance with the FPS will not be voluntary. The same non-voluntary compliance will apply to  the industry standards which will work differently from ‘membership’ of the regulator, which is likely to be voluntary.

Deciding the charity’s approach and other major fundraising choices will be the decision of the charity’s trustees.

Shedding some light on the matter is new draft guidance from the Charity Commission. SK point out that in reaching any decisions in this area, trustees will need to comply with the following key duties:

‘To act in what they reasonably consider to represent the best interests of the charitable objects’ which goes beyond acting simply in the best interests of the charity. Also to comply with the law, to operate with reasonable skill and care and to act ‘prudently.’

Trustees will need to take into account all relevant factors, including the needs of the charity’s beneficiaries and to assess the risks and potential benefits which various approaches will bring to their charity.

The other question SK have been debating is whether the proposals that come out of the Fundraising Review by Sir Stuart Etherington are self regulation or statutory.  Work is already underway to set up a new regulatory body for the sector – the intention was to improve on the current system but to keep the self-regulatory element.

“To some the proposals might give the impression of a voluntary system of regulation with the option to join in.  On closer scrutiny it becomes clear that although not a statutory regulator a level of compliance will be compulsory for all charities and compliance will be enforced by the new regulator. The proposals extend beyond the new regulator having simply the power to ‘name and shame’ charities to it having powers such as being able to issue ‘cease and desist’ orders to charities engaging in certain types of fundraising,” - says Jonathan Burchfield, SK Partner Charity & Social Enterprise.

“The proposal for the new regulator is that it will have the ability to regulate any charity that is fundraising from the public – not only those that choose to sign up to be bound by the regulator’s process.”

There are also plans to operate a membership structure so that charities have the right to use a ‘badge’ to signify a commitment to best practice.

This element of the new Regulator will be voluntary; a charity can choose whether or not to become a member but registration does not affect whether or not you are regulated by the new Regulator – all charities will be expected to abide by the industry minimum standards or face the consequences flowing from the new regulator.

As such say SK ‘signing up’ to membership is unlikely to affect income, unless it can be shown that public trust is increased when a charity is a member.

The industry standards will be a new Code of Fundraising Practice  which will be amended and developed by an independent standards-setting committee.

Any breach of these standards could lead to sanctions being imposed and potentially a ‘red flag’ on the charity’s regulator’s website. SK believe the difficulty with this proposal legally is that the organisation responsible for enforcing the standard will be directly involved with setting that standards and there will be only limited scope for appeal.

The recommendation is that there will be one chance for an independent review but no details of who would be the reviewer and this would only be on the grounds that new evidence exists or that there was a significant flaw in the process.

What this will mean in practice, is that the new standards will have to be clear and apply to all charities regardless of size and resources, which say SK is going to be difficult to achieve.

 

Please see full report attached for more details. 

 

Contact:

For further information please contact Vicki Bowles at VickiBowles@stoneking.co.uk or Tel: 01225 337599

Media enquiries:

Please contact Léonie Spencer at LCS@Stoneking.co.uk or Tel. 01225 337599.

Note to Editors:

Charity and voluntary sector work is at the heart of Stone King’s practice. The firm is recognised as one of the leading practices in the UK. We act for many hundreds of voluntary organisations including 189 of the country’s largest charities with activities ranging across a broad spectrum.

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Stone King fundraising regulation legal opinion report

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