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FCA sets out ‘sophisticated’ boundaries for Ucis investing

Technical specialist Jason Pope says advisers can certify investors as sophisticated, but have to make sure their assessment is robust.

The FCA has reiterated that investments such as unregulated collective investment schemes can still by recommended by advisers as long as firms are satisfied investors are sophisticated.

Speaking at the Alternative Investment Summit in London last week, FCA technical specialist in the policy, risk and research division Jason Pope said advisers can still recommend “non-mainstream pooled investments”, such as Ucis, traded life settlements and qualified investor schemes, as long as they can class them as sophisticated investors.

Pope said it is all about targeting the right products to the right investors.

Asked whether advisers could recommend alternative investments to the “group in the middle”, who understood the risks but were not high net worth individuals, Pope said if the person had invested a reasonable amount before, or had experience in the industry or type of assets, that “sounds like the the person you’re describing”.

Investors can self-certify themselves as sophisticated if they are a director of a £1m company, made an unlisted investment in the past two years, are part of an angel investing syndicate or have worked in private equity or finance.

Firms can assess retail investors as sophisticated if they believe they understand the risks, and have the signed authorisation of the investor.

Pope said the FCA wants advisers to take more care in classifying investors, but that does not mean those that understand the risks should not be allowed to invest.

He said: “What we don’t want is for someone to say, a client has shares from a demutualised building society or something like that and that makes them sophisticated.

“An investment in, for example, life settlements, requires some quite specific knowledge and actuarial understanding to be able to engage with the risks.”


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