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FSA’s Ucis warning sparks complaints wave

by Michelle Abrego on Mar 06, 2013 at 08:30

FSA’s Ucis warning sparks complaints wave

The Financial Services Authority’s (FSA) recent warning over unregulated collective investment schemes (Ucis) held in Sipps has caused a wave of complaints against advisers.

Damian McPhun, partner at Beale and Company, who represents advisers and their insurers, said the more the regulator drew attention to poor Ucis and Sipp advice, the more claims were likely to be made.

‘There is a concern that once the FSA gets a bee in its bonnet it can almost encourage people to make claims, even though they were perfectly happy with the advice given and were aware of what was happening,’ he said.

‘The concern is that, with the FSA’s continued focus on Ucis, there will be more attention on this and more claims coming through.’

Martin Taylor, head of client relations at claims management firm Rebus Investment Solutions, said January and February had been ‘crazily busy’ with Ucis complaints. He said the firm was handling claims from 500 clients against 100 advisers on around £35 million of assets.

The FSA in January issued a warning to advisers over unsuitable advice to transfer assets to Ucis held in Sipps.

It said it was concerned some advisers were advising on pension transfers and switches without assessing the investments.

26 comments so far. Why not have your say?

yellow army

Mar 06, 2013 at 08:54

will the last one out the door please switch off the lights

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Arthur Schopenhauer

Mar 06, 2013 at 08:58

EIS =UCIS clarify SEID=UCIS clarify BPRA = UCIS Clarify

Until there is regulation then advice this crazy situation will persist The rules were straightforward as to who could have these even discussed

The rest has been said many time here before though one wonders to what benefit

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Man in Black

Mar 06, 2013 at 09:09

And of course, the Schemes continue to be suspended as clients and advisers stressed by all these warnings try and pull their money...thus causing the stress to crystallise and spreading the misery around a bit....

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yellow army

Mar 06, 2013 at 09:13

martin taylor, the man who sold loads of film schemes to ifas at scion for years now going after the people that made him a lot of money. unbelievable

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Arthur Schopenhauer

Mar 06, 2013 at 09:20

@ Man in Black

I had a funny (sad) one yesterday talking to Quadris they are now apparently not suspended open to new business but closed to redemptions

Hard to resist !!!

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Anitaki

Mar 06, 2013 at 09:24

The ambulance chasers are already ordering new second cars

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Guy Hammett

Mar 06, 2013 at 09:36

I don't often comment on these things but surely it matters not who points out the poor advice but surely what is actually done about it?

If a client was "perfectly happy with the advice given and were aware of what was happening" plus having faith and ongoing dialogue with their adviser then can the mutterings of the FSA are actually bring forward a claim?

@ Arthur Schopenhauer

Quadris sounds like a monkey trap, a little treat in the jar with the narrow neck and the attached rope........ Once the hand goes in...........

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Anthony Smith

Mar 06, 2013 at 09:56

It should be well known that very few UCIS represent genuine investment opportunities. Many are purely speculative or worse. If you will play with fire then don't be surprised if you get burnt.

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Johny F

Mar 06, 2013 at 10:09

I think that's a gross over-exaggeration. I've been working with Irish dom funds for years now (as a Fund Director not a UK IFA) and many are more stringently regulated than in the UK (the CBoI is a stickler) and are no more speculative than many of their UK compatriots....including UCITS.

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Xiang Xhi

Mar 06, 2013 at 10:52

Quadris? Are these the ones that have a fund investing into trees in some remote rain forest somewhere. I read the prospectus for the fund a few years ago and my sides were splitting at some of the disclaimers. How people put money into these things I will never know.

I read a hilarious flyer for a bamboo fund the other day as well.

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SN6

Mar 06, 2013 at 11:15

Xiang Xhi,

Unsophisticated and vulnerable clients CONNED by people they trust! = FRAUD

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Dirk D

Mar 06, 2013 at 11:33

@ Jonny. Myabe 'UCIS' and 'UCITS' are different beasts?! :)

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Hickky

Mar 06, 2013 at 12:15

@ Johnny F

There is a good number of overseas regulated funds out there, but should we be advising on them?

The stance of the regulator is you should not recommend investments in UCIS unless the client is very high net worth, and it is used for a little extra diversification. I agree with this stance, but recognise the scamsters will move into areas we are allowed to advise on, as when one route closes, another route opens. A bit like the Ho Chi Minh trail.

So be extra vigilent on assessing new funds coming to the market. If a regulated fund promises to provide more diversification look critically. If internal structures look complex, give it a wide berth.

I personally don't trust hedge funds, long-short funds, positive return funds or whatever they call themselves this week. They increase volatility in the market, and take returns from the longer term investor and should be curbed in their activities. They are an unacceptable face of capitalism, alongside the scamsters and the claim management companies.

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Keith Cobby

Mar 06, 2013 at 12:23

In our regulated world the word 'unregulated' troubles me. I would never consider a UCIS irrespective of the size of the funds I had to invest. I would consider it was being run for the benefit of the directors and management.

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Graeme Laws

Mar 06, 2013 at 12:29

To be independent you have to show the regulator that you consider everything from premium bonds to the unregulated far east knicker elastic futures fund. Then when you recommend one of these UCIS, the same regulator opens its big gob in public and everyone who thinks he or she might have lost a bob or two demands their money back. And of course, gets it.

You couldn't make it up.

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John Frink

Mar 06, 2013 at 13:10

It's all the FSA's fault, until they started with their nonsense there was nothing wrong with these highly geared, undiversified and costly funds...

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Duncan Carter 2

Mar 06, 2013 at 13:23

But the commission is great...........

............sorry, what was the question?

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Sascha K

Mar 06, 2013 at 15:14

Graeme Laws: Where exactly does the leap in your narrative from "consider" to "recommend" come from?

Oh right, 10% commission. Sorry, stupid question.

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madmitch

Mar 06, 2013 at 16:58

Its a selling Job!!

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madmitch

Mar 06, 2013 at 16:59

Or in several cases a scamming Job.

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Barman

Mar 06, 2013 at 18:42

G Laws - if UCIS is not suitable for your target market you dont have to consider it under the RDR.

You only consider whats appropriate for your client bank, not whats appropriate for your bank account.

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phil castle via mobile

Mar 07, 2013 at 06:57

I find myself in agreement with Hicky.

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Anitaki

Mar 07, 2013 at 07:41

I find myself in agreement with Hicky. too

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A Bit Left Field

Mar 07, 2013 at 08:50

There seems to be a lot of confusion in these comments about UCIS, UCITS, regulated and unregulated offshore funds. UCIS are a breed apart and are the vehicle of choice for those with hidden agendas. It is very simple - UCIS are unregulated, offshore funds and they don't have to report in anything like the detail of regulated funds (onshore or offshore). I can't see why the FSA wants any adviser to consider them as the adviser can never be quite sure what lies beneath. It doesn't matter how much it promises to deliver, if you can't see what the risks are, it's not worth taking that risk.

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Chris Taylor, MD, The Investment Bridge

Mar 08, 2013 at 16:42

As with most things the word 'differentiation' is important. Not all UCIS are the same ... clearly. Some UCIS can be respectable funds, albeit offshore, but domiciled in countries with strong regulations, such as Luxembourg, mananged onshore, ie in the UK, by FSA authorised and regulated asset managers. There can be tax advantages in this regulatory arbitrage set up, etc. Indeed it is possible to describe certain UCIS as low risk, and to be accurate in doing so. That said obviously we all recognise the wholly appropriate concerns surrounding the more esoteric, illiquid, badly managed, opaque, odd-ball schemes that abound ....

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Luxemburg3r

Mar 09, 2013 at 10:04

Echoing Chris Taylor's points, there are plenty of well managed and respectable UCIS.

Equally, there are plenty of entrepreneurial types who have a business idea and need to raise capital. While they sell shares in the business, they have no regulatory issues, but when they run out of options and turn to retail advisers to help them raise additional capital, the problems start.

While the company directors would like to have a regulated fund, they usually do not have enough money to fund the cost of regulation or to seed the fund.

Having no option other than UCIS, the Financial Promotion rules kick in, once the directors seek distribution through retail advisers. Most retail advisers do not have the resources to do effective DD on an investment of this type and should plainly recognise that fact and steer clear. Many didn't because they were lured by the high levels of commissions, which is the only currency available to the directors to persuade advisers to look at the investment opportunity in the first place.

Now we have a mixture of ignorance and greed.

How many advisers have the resources to judge whether or not the directors have the ability to run the business successfully and to deliver on the business plan? Very few, I would suggest.

Investors only lose money in UCIS if they are invested.

Retail investors should only be invested in regulated funds. UCIS should be the exclusive domain of "sophisticated investors", who can take additional professional advice.

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