What Is the Future of Unregulated Collective Investments (UCIS)?
Earlier this year we wrote about unregulated collective investments schemes (UCIS). In that post, we explained that UCIS were risky products, deemed inappropriate for ‘unsophisticated’ investors – those deemed too inexperienced and/or of too low-net-worth to be allowed to take on the risk associated with UCIS.
We closed by asking what the future held for unregulated investments. Here we try to answer that question by looking at what has happened since the UCIS marketing restrictions came into force in January, 2014.
Problems for UCIS
One thing threatening the existence of UCIS is that the ban on selling UCIS to unsophisticated investors has been far from successful in protecting vulnerable people from the risks of UCIS. Some think this makes a total ban more likely in the near future.
For example, this summer, one rogue advisor at Aspire Personal Finance was banned and hit with a £290,344 fine for making unsuitable recommendations: essentially, flaunting the ban. Gpfm thoroughly condemns such conduct. We pride ourselves on offering credible financial advice to our clients and view such behaviour with severe disapprobation.
Even after 2014’s domestic restrictions, some advisors have found other dubious ways to continue the unrestricted promotion of UCIS.
Speaking to FT, David Norton from AES International reported that “It is commonplace, in markets where there are high concentrations of British expatriates seeking financial advice, to see unscrupulous offshore financial salesmen looking to exploit lax regulation and a lack of awareness”. Gpfm stands in staunch opposition to such practices.
A Credible Challenge?
In light of this kind of behaviour, a petition was launched at the end of 2014 to challenge the current state of affairs, arguing that the January 2014 restrictions were ineffectual at protecting vulnerable savers and only a total ban would be able to ensure people’s economic security.
The petition is still live here, but has failed to garner significant support. So although some are finding ways to continue to market unregulated investments at unsuitable investors, it seems unlikely that further restrictive legislation is on the horizon for UCIS in the near future
Danger to Pensioners
Many of the people being badly advised over UCIS investment are investing as part of their SIPP – their Self-Invested Personal Pension. This is especially dangerous since, as we have written before, pension investments are particularly prone to pressures from the volatile markets.
Because UCIS are not regulated by the FSA, they offer higher risk and less protection should the investment go wrong. This makes them particularly unsuitable to people saving for pensions.
For pensions advice you can rely on, contact our Hertfordshire financial planners today on 01992 500 261 or email firstname.lastname@example.org.