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FSA may take action over online trust promotions

The FSA has raised concerns over internet-based promotions by 11 intermediaries marketing VCTs and is considering enforcement action against the worst offenders.

The FSA identified venture capital trusts as an area of potential risk to consumers in March and wrote to intermed- iaries in August over fears that investors were not being given a balanced view. It has found that most web promotions do not give adequate explanations of how VCTs work. Concerns include not mentioning that VCTs must be held for three years to qualify for tax relief and that investments are in small unquoted companies, which can be high risk. Other sites put these warnings in the small print.

It says promotions fail to mention the restrictions involved in selling VCT shares or give information on charges.

Director of retail themes Vernon Everitt says: “All financial promotions must be clear, fair and not misleading and, particularly with investments such as VCTs, must be balanced. Most web-based promotions we reviewed did not explain all the main risks prominently.”

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