FSA unveils Ucis products crackdown
Wednesday 22 August 2012
A crackdown on the promotion of investments in unusual assets such as fine wines was announced by the City watchdog today after it found “high levels” of unsuitable advice being given.
The Financial Services Authority (FSA) wants the promotion of unregulated collective investment schemes (Ucis) and similar products to be restricted to "sophisticated investors" and people who have a high net worth, for whom the products are more likely to be suitable.
The Ucis retail market is worth about £2.5 billion in the UK and some 85,000 ordinary retail investors have direct holdings in investments, which can hold assets like traded life policy investments, fine wines, crops and timber.
Ucis are not subject to the same rules as regulated collective investment schemes, which have certain safeguards such as making sure risk is prudently spread.
While this means that those operating schemes have greater freedom to pursue new or unorthodox strategies, it also means investors are generally placing their cash at a higher risk than more mainstream investments.
The FSA said it has uncovered "high levels" of unsuitable advice being given and warned that ordinary investors are being exposed to significant potential for large losses on products which are clearly unsuited to most people.
Its own research found that only one in every four advised sales of Ucis to retail customers was suitable and took into account the customer's needs.
It said examples of unsuitable advice it had found included pensioners being advised to invest all of their wealth in a single Ucis and a customer who was advised to borrow money to invest in Ucis and service the debt with withdrawals from their investment.
Under current rules, the investments can be promoted to ordinary investors if an adviser first assesses the product's suitability.
But under the watchdog's plans, firms will be prevented from marketing Ucis to ordinary retail customers, even in the context of financial advice.
Gavin Stewart, acting director of policy, risk and research at the FSA, said that if customers believe they have been mis-sold a product they should contact the firm that arranged it and raise their concerns.
If the customer is still not satisfied, they can complain to the Financial Ombudsman Service (FOS) or, if the firm has gone bust, the Financial Services Compensation Scheme (FSCS) could help.
He added: "While we have found problems with a number of sales, we are not saying that all existing investments were mis-sold.
"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."
The consultation runs until November 14 and the finalised rules are set to be published early next year.
- 1 Frank Lampard's face drops when Holly Willoughby introduces him as a 'Man City legend'
- 2 'Do not give them a reason': Baltimore man divides police and rioters in hope of avoiding violence
- 3 X Factor in crisis as numbers of people auditioning plummets
- 4 Baltimore riots: Furious mother marches her son home live on TV
- 5 General Election 2015: Stephen Hawking says he will vote Labour
General Election 2015: Tories suspend candidate who said she would never support 'the Jew' Ed Miliband
Bali Nine executions: Indonesia confirms killings of Andrew Chan and Myuran Sukumaran will go ahead
The four utterly contradictory polls that tell the story of this election and why it is pointless trying to predict the outcome
General Election 2015: Prospect of Labour-SNP coalition makes one in four voters less likely to support Ed Miliband, says survey
Baltimore riots: Furious mother marches her son home live on TV
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
EU exit would hit UK economy much harder than neighbouring countries, study finds
Andrew Lloyd Webber: Phantom of the Opera writer mocked after issuing a warning about Ed Miliband and Nicola Sturgeon
General election 2015: Labour will toughen hate crimes legislation surrounding Islamophobia
iJobs Money & Business
£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...
£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...
£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...
£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...