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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 scheme vehicles are among products out of scope of the ban on promoting 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.

The products excluded from the ban 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 EIS and seed EIS, unless structured as Ucis. The marketing of special purpose vehicles pooling investment primarily in shares and bonds is also not restricted.

Investments 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 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 is reviewing this criteria.

The regulator delayed issuing its final rules, expected in April, after concern that VCTs, EIS and ETPs would fall victim to the ban. Bestinvest estimated the original  ban would have wiped out as much as 75 per cent of VCT fundraising.

FCA director of policy risk and research Christopher Woolard says: ”These rules should help 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  experienced investors.”

Octopus managing director Guy Myles says: “The FCA has accepted there’s a fundamental difference between what it considers to be risky, unregulated investment products and those it sees as being ‘higher risk’ in nature, but which already have strong corporate governance measures in place.”


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