The proposed move means that after the ban, in the retail market, promotions will generally be restricted to sophisticated investors and HNWI for whom the products are more likely to be suitable.
As of now, UCIS can be promoted to ordinary retail investors if an adviser first assesses the product’s suitability.
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The consultation paper succeeds the work undertaken by the FSA, which found that only one in every four advised sales of UCIS to retail customers were suitable, taking into account the customer’s needs and requirements.
Further, FSA has also found that many promotions breach the restrictions and only a minority of advice is suitable.
It is due to the high levels of unsuitable advice it has uncovered and also because of the potential for customer detriment that the FSA is planning to take the move.
Also, a number of non-mainstream pooled investments have also failed completely in recent years, leading to total investment loss for customers.
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By GlobalDataGavin Stewart, acting director of policy, risk and research at the FSA remarked, "Product risks can be much greater on UCIS and similar products than on more mainstream investments and we have found that 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."
