Back in April the regulator indicated it would be including the sale and marketing of Ucis in its consultation on Traded Life Policy Investments (TLPIs), otherwise referred to as “death bonds”, which are often categorised as Ucis.
Today’s consultation paper should prevent firms from marketing Ucis to ordinary retail investors, the City watchdog said, even in the context of financial advice.
Currently Ucis can be promoted to ordinary retail investors if an adviser first assesses the product’s suitability.
The consultation paper follows extensive work undertaken by the FSA where it found that only one in every four advised sales of Ucis to retail customers were suitable, taking into account the customer’s needs and requirements.
The regulator cited examples of poor advice as a pensioner being advised to invest all of their wealth in a single, illiquid Ucis with a view to generating income; and a customer advised to borrow money to invest in Ucis and service the debt from withdrawals from that investment.
Those impacted
According to FSA estimates the Ucis retail market is worth around £2.5bn in the UK and a total ofo 85,000 ordinary retail investors have direct holding in these investments.
Common assets for Ucis to hold are TLPIs, fine wines, crops and timber.
Gavin Stewart, acting director of policy, risk and research, said: “Another £1.5 billion is invested in products, such as securities issued by special purpose vehicles, which can carry similar risks for investors. Under our proposals, firms should only promote these products to people for whom a UCIS or similar product is more likely to be right.
“While we have found problems with a number of sales, we are not saying that all existing investments were mis-sold. Existing customers who have questions about their investment may want to contact a financial adviser. Advisers will be able to help explain how the investment works, whether it is still right for them and what their options are.”
