FSA Consultation Paper on Restricting the Retail Distribution of UCIS

On August 22, the FSA published a consultation paper on restrictions on the retail distribution of unregulated collective investment schemes (UCIS) and close substitutes. CP12/19

In CP 12/19, the FSA outlines proposals to ban the promotion of UCIS and close substitutes to most ordinary UK retail investors. As providing financial advice generally includes making a financial promotion, by limiting the promotion of UCIS the FSA aims to limit the number of retail clients being wrongly advised to invest in UCIS.

Highlights include:

  • changing the financial promotion rules to limit the type of customer to whom firms may promote financial promotions for UCIS and closely substitutable investments;
  • Handbook guidance on the effect of the financial promotion rules on advised sales to clarify that personal recommendations generally amount to a financial promotion and, as a result of the marketing restrictions, advice on a non-mainstream pooled investment may result in an unlawful promotion if no valid exemption is available; and
  • updating the retail investment product definition to clarify the position on advice on UCIS and substitutable products in relation to Retail Distribution Review independence requirements.

Comments can be made on the proposals until November 14.

In keeping with its regulatory objective of protecting consumers, on August 17, the FSA published final notices issued to Richard Rhys and Anthony Adams, both former directors of MNFA Ltd (in liquidation), for their involvement in mis-selling a UCIS. Final Notice for Mr. RhysFinal Notice for Mr. Adams.