The UK financial market supervisory body has published proposals to restrict the promotion of Unregulated Collective Investment Schemes (UCIS) and similar products to the vast majority of retail investors in the UK.
Under the proposed regulation, the investment products developed exclusively for high net worth individuals will be banned for retail market promotion.
According to the current law, UCIS can be promoted to ordinary retail investors if an adviser first assesses the product’s suitability, but the recent law, if implemented will stop firms from marketing UCIS to ordinary retail customers, even in the context of financial advice.
FSA risk and research acting director of policy Gavin Stewart said product risks can be much greater on UCIS and similar products than on more mainstream investments and have been found that the majority of retail promotions and sales fall a long way short of 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."
FSA conducted an extensive study and found that only one in every four advised sales of UCIS to retail customers were suitable, and many promotions breached the restrictions and only a few advices are suitable.
The regulatory body also plans to introduce new set of laws to avert any risk associated with other products which are similar to UCIS but are out of the ambit of the same marketing restrictions.
