The FSA is planning to ban the promotion of unregulated collective investment schemes to retail investors, with promotion limited to sophisticated, high-net-worth individuals, Money Marketing understands.
The regulator is set to publish a paper later today that will put forward proposals to limit Ucis promotion as part of its review into how the schemes can be sold. The paper will cover Ucis and similar products.
The review of rules relating to Ucis has already prompted the FSA to signal a ban on marketing traded life settlements to the vast majority of retail clients. The regulator announced its proposal to ban the promotion of life settlements in a guidance consultation in November and confirmed its intention to consult on the ban in April.
The FSA’s statement in November, which referred to life settlements as “toxic products”, triggered the EEA Life Settlements fund to suspend redemptions.
Ucis rules already state the schemes cannot be promoted to the public unless clients meet specific exemptions, such as if the client can be shown to be a sophisticated investor.
The FSA has taken action against a number of IFAs for failing to ensure Ucis recommendations were suitable and has previously said Ucis are rarely suitable for retail investors. The FSA clarified in June that firms’ independent status will not be compromised by a failure to recommend high-risk products such as Ucis.
Page Russell director Tim Page says: “This has been on the cards for a long time. Hopefully this will put a cap on the kind of schemes we have seen recently that just keep blowing up.”
Last week, Money Marketing revealed investors in the suspended Connaught Income Series 1 Ucis fund could face 50 per cent losses on their investments.