FSA calls for curbs on exotic collective investment schemes

City A.M. Reporter
The Financial Services Authority (FSA) has widened its crackdown on unregulated investments in unusual assets such as crops and fine wines, saying they should not be promoted to retail investors as compensation for mis-selling may not be available.

The FSA published proposals today to ban financial advisors from recommending so-called Unregulated Collective Investment Schemes (UCIS) and similar products to most ordinary retail investors in Britain after uncovering some mis-selling.

Sales should be restricted to people who earn more than £100,000 a year, have over £250,000 to invest or have extensive experience in investing so they understand the risks, the watchdog proposed.

The latest suggestions for the first time expand the FSA's recent moves into product intervention to a whole market, as the watchdog tries to end years of financial mis-selling scandals by stepping in much earlier as problems emerge.

The FSA is being scrapped next year and its successor, the Financial Conduct Authority, is expected to have powers to go a step further and check at the design stage whether a product is suitable for its target market, and to ban products outright if problems crop up once they are being sold.

The FSA estimated the UCIS retail market is worth about £2.5bn a year, serving 85,000 investors having holdings in products based on non-traditional strategies such as traded life policy investments, unlisted shares and timber.