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FCA confirms which products will not come under Ucis promotion ban

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Exchange traded products, venture capital trusts and enterprise investment schemes are among the products that will fall out of scope of rules banning the promotion of unregulated collective investment schemes to most UK retail investors.

The Financial Conduct Authority has published final rules to ban Ucis being marketed to investors unless they are sophisticated investors or high net worth individuals.

It has set out a number of products which will now fall out of scope of the marketing ban.

These are: exchange traded products, real estate investment trusts, venture capital trusts, overseas investment companies which meet the criteria for investment trust status if based in the UK and EISs and seed EISs, unless structured as Ucis.

The marketing of special purpose vehicles pooling investment primarily in shares and bonds is also not restricted.

Investments that will be subject to the marketing ban include: units in qualified investor schemes, traded life settlements, units in Ucis and securities issued by special purpose vehicles pooling investment in assets other than listed or unlisted shares or bonds.

Sophisticated investors are defined by the FCA as retail clients with “extensive investment experience and knowledge of complex instruments, able to understand and evaluate the risks and potential rewards of unusual, complex and/or illiquid investments”.

To be classed as high net worth, investors need to have an annual income of more than £100,000 or have investable net assets of more than £250,000. The FCA says it is reviewing the criteria for high net worth individuals and may update this in future.

The regulator delayed issuing its final rules, expected in April, to establish which investment vehicles would fall under the scope of the ban.

The Association of Investment Companies warned in September that the ban as proposed would cause “significant detriment to the VCT industry”, while Bestinvest has said the ban could wipe out as much as 75 per cent of VCT fundraising.

FCA director of policy risk and research Christopher Woolard says: “Consumers have lost substantial amounts of money investing in Ucis and similar products in recent years so the need to introduce new rules to prevent this from continuing was essential. However, we have also taken into account that for some investors these products can still be appropriate.

“We believe today’s rules strike the right balance. They should go a long way in helping to protect the majority of retail investors in the UK from inappropriate promotions while allowing the industry to market these risky, unusual or complex investment propositions to those experienced investors for whom they could be suitable options.”



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Will be interesting to see what the logic is. If it doesn’t stack up the FCA’s credibility will have lasted all of 66 days.

    They had the opportunity to do what was right but it appears on the face of it that vested interests and politics won the day.

  2. How exactly do they class a ‘high net worth’ individual?

  3. @Anonymous 11:39

    Same as now. Generally speaking, income over £100k or investable assets over £250k

  4. FCA director of policy risk and research Christopher Woolard says: “Consumers have lost substantial amounts of money investing in Ucis and similar products in recent years so the need to introduce new rules to prevent this from continuing was essential.
    Investors have lost substantial amounts of money in regulated investments so it’s not the regulation that mitigates risk…..

  5. Biggus Dickus 4th June 2013 at 1:24 pm

    No more can’t-fail, high commission, no regulation to worry about Stirling Mortimer schemes, then?

  6. Richard Bishop 4th June 2013 at 1:56 pm

    I think the horse has bolted on UCIS.

  7. I know it is unpopular to support the FCA in any way but I think they have this one pretty much bang on. The exemptions for VCT and EIS schemes makes sense and shows that (in this instance) the FCA have listened to reason. I find it difficult to imagine a scenario where a UCIS would suit a retail client (other than a small number of experienced investors who are capable of understanding the levels and types of risk attaching to the various schemes). Let the unregulated guys /accountants recommend them if their conscience can stand it. As an industry we need to be seen to be cleaning up our act.

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