Advisers with clients invested in life settlement fund EEA have branded the Financial Services Authority's (FSA) rhetoric on traded life policy investments (TPLIs) "reckless" after the fund was forced to close.
Advisers fear other TLPIs will be suspended in the coming days.
Geoff Hartnell [pictured], an IFA at Vintage Financial, said the FSA had been "reckless" in its use of evocative language like "toxic" and "death bonds" in its consultation on the ban.
"I thought I was reading a copy of the Sunday Sport rather than the regulator's home page," Hartnell said.
It was the "panic redemptions" which followed the FSA's statement that ultimately led to the demise of the EEA fund, he added - not the policies themselves.
"We had concerns about the regulation, never the fund.
"Every client we have had in the EEA fund has made 9% every year. Unlike Keydata, investors had to be sophisticated and high net worth.
James Davison, an adviser at IFG Financial Services, which has client money in EEA, said there is a real danger other TLPIs would be suspended in the next few days, pulling even more advisers into trouble.
Davison said that whilst IFG's exposure to the fund was "limited", IFAs now face the same problems caused by the collapse of the property market in 2006.
A spokesperson for EEA said the board intended to write to shareholders in the near future to provide further information.
The suspension of dealings "will in no way affect the ability of the fund to pay premiums on insurance policies in the usual manner," he added.
EIS and Seed EIS sectors
'Truly making a difference'
Avoidance, evasion and non-compliance
From 6 April 2019