Download Policy Statement PS13/3: Restrictions on the retail

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Policy Statement PS13/3: Restrictions on the retail distribution of
unregulated collective investment schemes and close substitutes
(13/15)
Introduction
The FCA, following on from investigatory work carried out by the FSA in “FSA CP12/19”, has
issued a Policy statement. The majority of respondents agreed with the general aim of the proposals
to protect ordinary retail investors from the risks arising from the inappropriate promotion of “nonmainstream pooled investments” (NMPIs).
The original investigations uncovered serious failings across the majority of high risk and complex
investments which were advised to ordinary retail investors. The FSA found that only one in four
advised sales of Unregulated Collective Investment Schemes (UCIS) to retail clients were suitable
and that many promotions were breaching the existing UCIS marketing restrictions. Concerns were
also identified, in relation to Products, which are close substitutes for UCIS and which the existing
marketing restriction had no effect. The Regulator pointed out a number of NMPIs had failed
completely in recent years, which has lead to customers losing their total investment.
Who will be affected by this policy statement?
This policy statement will be of interest to the following types of firms;
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Firms promoting Products, now classified as “non-mainstream pooled investments”
(NMPI’s) to retail clients;
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Product providers offering these Products or which allow access to them through investment
wrappers;
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Discretionary portfolio managers who may include NMPIs in portfolios; and
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Providers that create these investments.
Which products will not be covered?
A number of products now lie out of the scope of the marketing restrictions. Such products include
the following;
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Exchange Traded Products;
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Overseas Investment Companies which would meet the criteria for investment trust status if
based in the UK;
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Real Estate Investment Trusts (REITs);
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Venture Capital Trusts (VCTs); and
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Enterprise Investment Schemes (EISs) Seed Enterprise Investment Schemes (SEISs), unless
they are structured as UCIS.
The marketing of Special Purpose Vehicles pooling investment primarily in shares and bonds will
also not be restricted.
It is important to note, that whilst the above products fall outside the scope of the new rules, firms
still need to ensure promotional communications about these products meet the fair, clear and not
misleading rules, and if any advice is given, firms must ensure any recommendation to invest is
suitable for that client.
Which products will be covered?
The following Products will be covered by the new marketing restrictions:
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Units in Qualified Investor Schemes (QIS);
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Traded life policy investments;
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Units in UCIS; and
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Securities Issued by SPVs pooling investment in assets other than listed or unlisted shares or
bonds.
The flow chart (see appendix I) which is to be used in the future to determine whether an individual
product will be allowed to be recommended.
Action Points
The restrictions will take effect from 1st January 2014, which gives firms time to implement the
new rules.
Firms and financial advisers will be required to pay due regard to the flow diagram when
ascertaining whether or not a particular product can be promoted, marketed or recommended to a
retail client. If you require any further guidance at all, our dedicated team of consultants will be
more than happy to help.
© CPA Audit LLP. First edition, 06/13
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APPENDIX I – [note: this flow chart is an extract from page 56-58 of the FCA policy
statement]
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