The Association of Investment Companies (AIC) has warned offshore investment trusts and UK REITs could be under threat from Financial Services Authority (FSA) proposals to ban promotions of unregulated collective investment schemes (UCIS) to ordinary retail investors.
Some vehicles, including investment trusts which trade in liquid shares and securities, have been exempt from the proposed ban, revealed in an FSA consultation paper last August.
Although not specifically mentioned in the paper, venture capital trusts (VCTs) have not been given immunity, which has led the British Private Equity and Venture Capital Association (BVCA) to lobby the Treasury over the FSA’s proposals.
The AIC has now cautioned VCTs are not the only vehicles under threat. Ian Sayers, director general, said a number of offshore trusts and REITs are unaware they could be affected by the UCIS ban, due to the FSA’s “opaque” approach.
“The restrictions on UCIS state that only special purpose vehicles which invest in liquid shares and securities are not caught out by the ban, but everything else is,” said Sayers.
“Basically, anything that is illiquid and not mainstream could be caught, so offshore private equity trusts and UK REITs, for example, also face the prospect of only being marketed to sophisticated investors.”
The AIC is lobbying the FSA over its proposals, and the results of the consultation are expected to be announced towards the end of the first quarter.
“We have made our feelings known to the FSA and we feel the regulator has to be fair to the whole of the market.
“It does not make any sense to me why a UK REIT would be banned but a Taiwanese open-ended fund would be an acceptable investment for a retail investor to put their savings into,” he added.
A spokesperson for the FSA said the regulator is still consulting over the proposals.
“Certain investment trusts, depending on their legal structure, do fall under the ban, but it is not a forgone conclusion they will be banned,” said the FSA.
“We are engaging with the industry and consumer groups to identify which products should be included in the final draft of our proposals.”
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