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Advisers urge FSA to avoid “blanket ban” on VCTs and Reits

FSA Front 480

Advisers have welcomed the FSA’s decision to reconsider including products such as venture capital trusts and real estate investment trusts in its proposed ban on the promotion of unregulated collective investment schemes to retail investors.

The FSA published a consultation paper on banning the promotion of Ucis to retail investors in August and warned VCTs, Reits, exchange traded products and overseas investment companies that meet the criteria for investment trust status in the UK could be in scope.

The regulator has now written to the Association of Investment Companies saying it is considering amending its rules to exclude these products, and is also looking at concerns around products such as enterprise investment schemes and seed enterprise investment schemes.

FSA head of investment policy David Geale says: “We are considering whether our original proposals provide sufficient flexibility for firms with high-net-worth or sophisticated customers.”

In a letter to its members, the AIC says: “The AIC is hopeful that a change of policy approach excluding our members from the restrictions will be confirmed in due course.”

Aurora Financial Planning chartered financial planner Aj Somal says: “If these products do fall under the ban, clients will lose out.

“The FSA needs to tread carefully on this and exclude them from the ban.”

Capital Asset Management chief executive Alan Smith says: “Products such as Reits and basic VCTs have a lot of practical application for investors. I do not think the FSA ever intended to capture these products in a blanket ban.”


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. These ‘products’ have the same general characteristics in terms of risk as UCIS. They are not suitable for the large majority retail investors.

    They are nearly always more difficult to understand and are not covered by the FSCS if they go pop.

    Political pressure and the shouting of vested interests excluded… what logical reason is there to afford ‘flexibility’ to these and not UCIS when considering the best interests of the majority of clients?

  2. There is a lot of confusion around what ‘REITs’ actually are. Certainly in a UK context, and across Europe, the vast majority of REITs are no different to any other publicly listed commercial business. They are no more ‘products’ than Google plc or Volkeswagon. Their shares are listed on public stock exchanges and they are subject to exactly the same rules (promotion, who can buy, corporate law etc etc) as any other listed business. Why should the FSA treat retail investment into REITs any differently to these companies?

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