FCA to ban the promotion of UCIS to ordinary retail investors

The rules mean that, in the retail market, promotions of these riskier and often very complex fund structures will generally be restricted to sophisticated investors and high net worth individuals for whom these products are more likely to be suitable.

The ban follows on from work undertaken by the FSA, which found that only a quarter of advised sales of UCIS to retail customers was suitable and that many promotions breached the existing UCIS marketing restrictions.

There were also concerns over products which are close substitutes for UCIS and in relation to which the existing marketing restriction had no effect. A number of NMPIs have failed completely in recent years, leading to customers losing their total investment

A number of products now lie out of scope of the marketing restrictions. These include exchange traded products, overseas investment companies that would meet the criteria for investment trust status if based in the UK, real estate investment trusts and venture capital trusts. Enterprise investment schemes and seed enterprise investment schemes, unless structured as UCIS, are also outside the scope of the rules.  The marketing of special purpose vehicles pooling investment primarily in shares and bonds is also not restricted.

However, firms still need to ensure promotional communications about these products are fair, clear and not misleading, and if advice is given they must ensure any recommendation to invest is suitable to the client.

Christopher Woolard, director of policy risk & research, said:

"Consumers have lost substantial amounts of money investing in UCIS and similar products in recent years so the need to introduce new rules to prevent this from continuing was essential. However, we have also taken into account that for some investors these products can still be appropriate.

"We believe today's rules strike the right balance. They should go a long way in helping to protect the majority of retail investors in the UK from inappropriate promotions while allowing the industry to market these risky, unusual or complex investment propositions to those experienced investors for whom they could be suitable options."