EEA Fund Management has hit out at the FSA after the regulator described traded life policies as “high risk, toxic products”.
In a written response to the regulator, EEA says the use of the term “toxic” in relation to traded life policy investments as an asset class “is without merit and reckless”. In the letter signed by chairman Simon Shaw, the firm claimed the word “toxic” implied the products were harmful to investors.
It also objected to the word “Ponzi”, which was “commonly understood as being fraudulent” and “highly damaging, will undermine market confidence and potentially lead to consumer detriment”.
The firm agreed that traded life policies should not be mass marketed to retail investors. However, it did believe the products are suitable for some retail investors, such as sophisticated investors and “certain high net worth individuals”.
The firm claims other investments investing in alternative assets could be as risky as traded life policies, adding that any ban or sale would deny sophisticated investors an “opportunity to diversify risk where this is suitable”.
The company says it did not believe there was “any sound basis” for the regulator to treat the fund any differently to any other unregulated collective investment scheme.
EEA says the FSA could have taken other measures to ensure IFAs do not recommend the investments to mass market retail investors, by increasing the minimum investment level, introducing a limit to the percentage of a total portfolio, or limiting the level of fees paid to advisers.
EEA Fund Management is the marketing agent for the EEA Life Settlements fund.
The fund was forced to suspend redemptions at the end of November after receiving large numbers of redemption requests from advisers and institutional investors.