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Ucis investment via wrappers to come under marketing ban

FSA Skyview 480

The FSA is to extend its ban on the promotion of unregulated collective investment schemes to most retail investors to include Ucis investments through Isas, Sipps and platforms.

The regulator has published its review into Ucis rules today which proposes to ban the promotion of Ucis to the majority of retail investors with the exception of sophisticated and high net worth individuals.

The FSA says its supervisory and enforcement work shows advisers have misunderstood the rules around promoting Ucis, which cannot be marketed to the general public unless consumers meet certain exemptions. It has so far taken enforcement action against seven adviser firms and 13 individuals.

It has concentrated its work and its proposals on direct investment into Ucis. But the FSA is not considering changes to the promotion of Ucis where they are held as part of underlying assets in a regulated fund.

It gives the examples of a regulated collective investment scheme holding Ucis as proportion of its underlying investment, or or a unit-linked insurance fund which can hold up to 20 per cent in Ucis provided all assets meet certain requirements.

But the FSA says: “To be clear, we do not regard investments that are merely ‘wrapped’ by another product to amount to indirect investment. Investment through products such as Isas, Sipps and platform services are therefore treated as direct investment for the purposes of this consultation.

“Under our proposals, investments via wrappers will be subject to the same marketing restriction as any other direct investment in non-mainstream pooled investments.”

Execution-only sales will not fall under the ban “where it is genuinely the case” a retail investor has sought out a Ucis.

FSA acting director of policy, risk and research Gavin Stewart says: “Product risks can be much greater on Ucis and similar products than on more mainstream investments and we have found the majority of retail promotions and sales fall a long way short of our existing standards.

“This is important because it is exposing ordinary investors, for most of whom these products are clearly unsuitable, to significant potential for large losses on what are often esoteric and illiquid investments. This situation needs to change and so we are acting now to prevent these products being marketed to ordinary retail investors in the future.”

He says the FSA is not saying all existing investments into Ucis were missold.

He adds: “Existing customers who have questions about their investment may want to contact a financial adviser.  Advisers will be able to help explain how the investment works, whether it is still right for them and what their options are. 

“If customers believe they were mis-sold a product they should contact the firm that arranged it for them and raise their concerns.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Seems ike the FSA have learned from their life settlement debacle, thank goodness.

    this is hw it should have been hndled and surely provides evidence for anyone facing losses through life settlement claims to tackle the regulator

  2. Tricky this. I obviously dont want to defend the obvious problems there have been, but I also wonder why appropriately qualified IFAs (post RDR) preparing individually suitable solutions shouldnt be able to choose from an unrestricted range of assets for their clients? Surely not all UCIS are the same?
    And it looks like the main problems historically were that some IFAs broke the existing rules that were already in place? The rules themselves may have been fine. So I dont quite get how this stops similar future rule-breaking?

  3. If UCIS are banned investments for retail customers will financial advisers be expected to pick up the tab when investments made on an execution only or as an HNW & Sophisticated investor basis go wrong?

  4. Yes let’s take all the direction of mainstream investments and concentrate on products that have been doing very well since the recession started as the FSA call them none main stream pooled investments, wasn’t ARCH CRU & key data a mainstream investment and regulated? I see they want to take the attention away from all the investors that lost out on that one.

  5. “to the majority of retail investors with the exception of sophisticated and high net worth individuals” – so much for TCF

  6. On 27 July 2012 the FSA prohibited Mr Rhys from performing any function in relation to any regulated activity carried on by any authorised person, exempt person, or exempt professional firm on the grounds that he is not a fit and proper person in that he lacks competence and capability. Mr Rhys was a director of MNFA Limited, on behalf of which he marketed and promoted an unregulated collective investment scheme (“UCIS”), without conducting the proper due diligence expected of IFAs. This led him to conclude, wrongly, that the scheme was not a UCIS, which in turn resulted in a failure to comply with the statutory and regulatory standards applicable to the promotion of a UCIS. Mr Rhys incompetently made misleading statements to investors and failed to take any steps to ensure the suitability of advice to customers

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