The Financial Conduct Authority (FCA) has banned the sale of unregulated collective investment schemes to ordinary retail investors.
The predessor to the FCA, the Financial Services Authority (FSA), proposed the ban back in August.
UCIS are pooled investments in often high-risk, esoteric assets. Investors that put money into them have no recourse the Financial Services Compensation Scheme (FSCS) if the firm they invested with defaults.
Today the FCA has published rules saying that in the retail market, promotions of these riskier and often very complex fund structures will generally be restricted to sophisticated investors and high net worth individuals for whom these products are more likely to be suitable.
A number of products lie out of scope of the restrictions.
These include exchange traded products, overseas investment companies that would meet the criteria for investment trust status if based in the UK, real estate investment trusts and venture capital trusts.
Enterprise investment schemes and seed enterprise investment schemes, unless structured as UCIS, are also outside the scope of the rules.
The marketing of special purpose vehicles pooling investment primarily in shares and bonds is also not restricted.
Firms still need to ensure promotional communications about these products are fair, clear and not misleading, and if advice is given they must ensure any recommendation to invest is suitable to the client, the FCA said.
The FCA said the total costs of the ban will be £17.5m to £32.5m. Ongoing costs to the regulator per year will be £0.5m to £1.3m.
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