I wrote in this column in April regarding the possibility that Structured Investments offering an auto-call or "kick-out" feature may fall foul of the qualifying rules for inclusion in a Stocks and Shares ISA following the release of Bulletin 19 from HMRC on the 30th March.
As I alluded to then, I felt it was unlikely, although at that stage not certain, that any action would be taken following the outcome of the HMRC review of these structures. I also stressed that it was not in anyone's interest to have a knee-jerk reaction until the exact motivation and objectives of the bulletin were fully understood hence why we did not remove the ISA option under our Enhanced Kick-Out Plan at that time.
This stance has since been vindicated following the subsequent HMRC bulletin released on the 20th May which concludes that plans with certain specified "kick-out" features do fall within ISA Regulation 7(6) and are therefore qualifying investments for use within a stocks and shares ISA. I also made the point that HMRC had previously reviewed the "Investec version" of our Enhanced Kick-Out Plan and agreed it qualifies for stocks and shares ISAs. At Investec Structured Products we put a huge amount of thought into not only our collection of plans, selection of risk/return profiles and how they might compliment a client's portfolio, but also the taxation side of the plans and whether or not the plans and structures are in keeping within the substance of HMRC guidance.
I made the point then that the bulletin only held implications for Structured Investments and not Structured Deposits and this sentiment holds true for most regulatory and FSA initiatives relating to Structured Products. Structured Deposits do not fall within the remit or scope of the Retail Distribution Review (RDR) nor were they included within the FSA's review of advice given on Lehmans backed Structured Investments in October 2009 other than to review some marketing literature.
For these and many other reasons we have recently separated our collection of Structured Deposits and Structured Investments into two different IFA guides to try and establish clear guidance for advisers when looking to recommend either or both types of structure. Going forward, it is important that advisers use these plans in the appropriate way and also fully understand the implications for each particular type.
I can only see regulatory "guidance" increasing from where we are today so advisers should focus on the advice side and let us get on with building sound structured solutions that you can be confident in recommending.
Gary Dale is Head of Intermediary Sales at Investec Structured Products.
These are his views and not to be taken as representative of Investec.
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