FSA is consulting on proposals to ban sales of UCIS to most retail investors. The proposals follow concerns that most UCIS are unsuitable for most retail investors. It suggests firms should be allowed to sell UCIS only to high-net-worth or sophisticated investors for whom they are more likely to be suitable. The proposals cover UCIS and “close substitutes”, including those available through wrappers. FSA plans to introduce a definition of “non-mainstream pooled investments” to cover UCIS and products such as traded life policies, and securities issued by special purpose vehicles when these are used as a means of pooling investments. Its rules will not ban genuine execution-only sales to retail investors where the firm has not promoted UCIS, and cover only direct investment. Indirect investment in UCIS, such as investment by regulated CIS, is outside the scope of the consultation, but FSA is clear that where another product is effectively a “wrapper” it will not consider the mere existence of the wrapper to mean the investment is not direct. The paper looks at the roles of intermediaries and providers. The changes cover:
- limiting the categories of permitted recipient for UCIS promotions while extending the scope of the products covered by the limitations;
- clarifying that products may not be suitable even if their promotion falls within the rules;
- introducing new record-keeping requirements specific to non-mainstream pooled investments promoted to retail investors; and
- how firms should treat customers who already have these products.
FSA asks for comments by 14 November and plans to issue final rules early in 2013. (Source:FSA Proposes to Ban UCIS for Ordinary Retail Investors)