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FSA targets wrap and Sipp providers in Ucis clampdown

FSA Front 480

The FSA is preparing to scrutinise the role of product providers as part of a wider clampdown on the marketing and promotion of Ucis investments.

In August, the regulator proposed banning the promotion of Ucis and similar products to retail investors unless they are sophisticated, high-net-worth individuals.

The ban would cover what the FSA calls “non-mainstream pooled investments” including Ucis, qualified investor schemes, securities issued by special purpose vehicles and traded life settlements.

Some structured products linked to non-mainstream assets would also come under the ban.

Speaking to Money Marketing, FSA technical specialist Jason Pope says: “Quite a significant minority of Ucis are accessed within Sipps and a majority of Ucis are held within some other platform or wrapper.

“We would like firms to think about the proposition they are creating for their customers and whether it suits the needs and risk tolerances of their target market.

“We are looking more at whether the products used to hold certain investments, including Ucis, are appropriate for their target market.”

Pope says the regulator will consider an outright ban of Ucis sales if behaviour does not improve.

He says: “If we saw continued bad behaviour we would have to consider what we can do. FSMA section 238 says you are only allowed to promote collective investment schemes in certain circumstances.

“Advisers recommending on that basis are following the Treasury’s rules rather than ours. If circumstances became so bad that we would want to ban the product, we would need to work with the Treasury. Obviously we hope it doesn’t come to that.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “This is an essential extension of the work the FSA has already done. In was inevitable that providers would eventually get dragged into this.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. I hope that includes the sale of Caribbean holiday homes and shares in resorts which has been so prolific in Essex and Suffolk. I cannot understand why some advisers would choose to get involved in high risk investment schemes like this.

  2. Christopher Lean 1st October 2012 at 3:34 pm

    @ Anon. 2.08pm

    Because the property developers pay very high, hidden commission to the introducers. This is justified by claiming that the developments are sold BMV( Below Market Value), in some places there is no market there to make an objective comparison.

    The developers need unsophisticated clients to place orders for off-plan projects in order to create a critical mass of initial buyers before banks lend to complete the project.

    The interesting time is going to be when clients want access to their lump sums at retirement and there is no market for their property in the SIPP. If there is no market and no tenants to provide income, there will be problems.

  3. man on the moon 1st October 2012 at 3:51 pm

    Just think of the yield on those lovely holiday homes in St lucia, brazil and cape verde. 7% I was told last week, 7% of what??

    Great investments until you wish to sell and then seek a secondary market. Agree with ANON that the investors wanting/neeeding access to their funds will find it very diffiicult to encash.

    The only people left holding the liability here will be the financial advisors and sipp trustees. The marketeers, agents etc will all be off in the sunset sipping cocktails. Literally.

    They are preying on the suspicions people hold toward pensions and their love of the sun, sea and cocktails.

  4. Iet me just make advisors aware that you cannot have an outright ban on UCIS, the reason being is that like any other product some UCIS products can play a good part in a clients portfolio. Yes they have been sold wrong in the past but just like any other product including regulated products no product is guaranteed. Another reason you can not ban these products is that restricting the un wealthy clients in certain products is like discrimination to them and unfair, just because you haven’t got loads of money doesn’t mean you wouldn’t like to take a risk, most millionaires become millionaires because they have taken a risk. If a client wants to invest in a UCIS and has been explained the risks involved then that should be sufficient enough, i mean common what are the exams for? and advisors should not be punished for a products failure because they would have given sound advice.

    I do agree with the FSA in some degree that these products are complicated so why don’t they bring in a specialised area or team to advise IFAs, no sorry they don’t want that because they are getting enough money from the claims they are making on advisors not truly knowing the structure or product, advisors need to use distributors who are known in this area or who are specialised in the UCIS Arena,

    Another reason why the FSA can not ban them is that have they forgot the word unregulated this is for a reason unregulated meaning if any clients want to invest in them they can invest in them via other routes i.e. unregulated firms and still receive commissions, the FSA are going about this the wrong way putting the levy up and casing IFAs who didn’t have the support of the FSA in the first place is just typical .

    Also just to put a smile on any advisors who use these products and they should be happy is that since 2008 UCIS products and alternatives have been the biggest products than any other sector and is rising every year and returns higher than the ftse 100 500 s&p and other regulated products that haven’t delivered over this recession.

    My advice to advisors is be wary of the FSA they are dictating to what and who you should run your business, and then when you do it wrong they will fine you. Make sure you have your professional indemnity cover checked for unregulated products make sure it’s included in your policy and that you are covered for section 166.

    Make sure your compliance person signs it off and his or hers qualifications should include cf 10

    Make sure you have systems and process in place as this is a key area that the FSA are looking at.

    And finally since most of you are dreading what’s going to happen when RDR comes into place in just less than three months ask yourselves this, why hasn’t the FSA put figures forward of how many product providers are RDR ready and that how many RDR compliant cases have passes through al ready? Well let me tell you probably none, and won’t be. Till early June or July so don’t worry sit back and watch the fire works comin to place when the FCA find out what a bunch of monkeys have been running the industry.

  5. My undestanding is that the SIPP funds are typiclly used as a deposit with the investor sourcing the rest of the purchase price outside the SIPP.

    To my mind this means the SIPP is in effect lending to member via a mortgage and as such breaking HMRC rules.

    Is my understanding correct?

    If it is then thousands of resort investments in SIPPs are illegal and would be subject to taxable investment surcharges

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