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Hot Topic – New Regulations for UCIS – CII R02 and AF4 exams

Hot Topic – New Regulations for UCIS – CII R02 and AF4 exams

Hot TopicThe FCA defines a UCIS as a collective investment scheme which is not authorised by them because it doesn’t meet specified criteria regarding diversification and investment.  The un-authorised investment is still legal but the marketing activity must be carried out subject to certain rules.

In 2010 the FSA issued a paper entitled ‘Unregulated Collective Investment Schemes: Good and poor practice report’ which identified various areas of concern; the lack of awareness of regulatory requirements, the lack of awareness of the risks involved and the product being promoted to customers who were not eligible to have the investment promoted to them.

According to the FSA only 1 in every 4 advised sale of UCIS to retail customers was actually suitable and that many of the promotions breached their rules.

Following the report and consultation with interested parties, in June this year the FCA published final rules to ban the promotion of UCIS to the vast majority of UK retail investors which will take effect from the 1st of January 2014.

Promotion of UCIS investments will be restricted to only sophisticated investors and high net worth clients.

These products are outside the restrictions:

  • Exchange traded products
  • Overseas investment companies that would meet the criteria for investment trust status if based in the UK
  • Real estate investment trusts
  • Venture capital trusts
  • Enterprise investment schemes and seed enterprise investment schemes (unless structured as UCIS).

The following investments are subject to marketing restrictions:

  • Units in qualified investor schemes (QIS)
  • Traded life policy investments
  • Units in UCIS
  • Securities issued by SPVs pooling investment in assets other than listed or unlisted shares or bonds.

The FCA has clearly said that they will carry on reviewing the market.