The Investment Management Association (IMA) has called on the Financial Services Authority (FSA) tighten up its definitions of banned 'toxic' products to avoid a catch-all situation with other similar investments.
In the FSA's consultation, Restrictions on the retail distribution of unregulated collective investment schemes (UCIS) and close substitutes, the FSA proposes to ban the promotion of UCIS to ordinary retail investors.
It follows a string of mis-selling cases linked to the sale of UCIS to retail investors.
In its response to the paper, the IMA welcomes a process in place to prevent "toxic" products - a label the FSA gave to products such as UCIS and traded life settlement policies - being distributed to retail consumers.
However it says: "The definition of 'non-mainstream pooled investments' (NMPIs) covers a wide range of investment products which have very similar characteristics to those which would be widely available to consumers without any such restriction
"It is very important that the definition of non-mainstream products should be sufficiently clear so as to identify accurately those products that represent the greatest risk of consumer detriment."
The IMA urges the FSA to clarify what products it sees as being included within the definition of NMPIs, and particularly whether venture capital trusts come under the scope of the new definition.
The IMA also says it has "some reservations" about the FSA making decisions about what is suitable and unsuitable for retail investors, saying, "it is entirely possible that is some circumstances UCIS could be an appropriate component of certain consumers' investment portfolio and within their risk appetite".
The fund management association rejected the FSA's proposal to require confirmation of compliance with the marketing restriction for each financial promotion.
It also rejected the proposal that the CF10 individual is the correct person to confirm compliance, saying this could lead to a creation of a difference in approach between larger firms that have a designated compliance person and those which have someone doing that function among other roles.
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