Support services provider Threesixty has put together a list of tips and hints for advisers considering recommending UCIS...
1 PI cover
Always ensure you have relevant PI cover prior to making any recommendation. This may need to be checked on a case by case basis.
All relevant staff and management should read and be familiar with the output of the FSA review. They should receive training and their CPD should be documented in detail.
The firm must have a robust process for promoting or advising on UCIS which must be known and followed, by all relevant staff.
What you and your clients need to know
The process should include arrangements for pre-approval.
Maintain management information showing full details of exemptions used and the results of pre-approval requests.
Supporting evidence for exemptions claimed should be retained.
7 Due diligence
Full due diligence should be undertaken on any UCIS which the firm is considering using.
Consider advice on UCIS to be a ‘promotion' and follow the financial promotion rules at all times.
The risks, both general and investment-specific, of a UCIS should be made clear to clients.
If you are an Article 3 MiFID Exempt firm or an Exempt CAD firm, ensure that orders are transmitted only to entities allowed by MiFID unless the firm is prepared to opt into MiFID itself.
Suitability: When is a client suitable for UCIS?
Promoting UCIS to clients is prohibited under Sections 21 and 238 of the Financial Services and Markets Act, but there are also a number of exemptions under COBS 4.12.
However, UCIS can be recommended to an investor who:
• is already a participant in a UCIS
• has been, in the last 30 months, a participant in an unregulated collective investment
• the firm has taken reasonable steps to ensure that investment in the collective investment scheme is suitable
• the firm has undertaken an adequate assessment of their expertise, experience and knowledge and that assessment gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the person is capable of making his own investment decisions and understanding the risks involved
• the firm has given a clear written warning that this will enable the firm to promote UCIS to the client and has stated in writing, in a document separate from the contract, that he is aware of the fact the firm can promote UCIS to them.
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