FSA unveils Ucis products crackdown

 

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.

PA

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there