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FSA to U-turn on VCT sales ban

FSA to U-turn on VCT sales ban

The Financial Services Authority (FSA) is to reconsider plans that would have restricted the sale of venture capital trusts (VCTs) and other high risk investments.

In October, Wealth Manager revealed the FSA was to bring a vast swathe of VCTs and enterprise investment schemes (EIS) under upcoming rules on unregulated collective investment schemes (Ucis), designed to ban the sale and promotion of the product to ordinary retail investors.

Internal correspondence from the regulator showed that both VCTs and EIS would be brought under the banner of Ucis depending on their internal structure, but the move was branded ‘absolute nonsense’ by tax experts.

Now the FSA, which has been consulting on the matter since publishing consultation paper 12/19 last August, is now set to turn back, questioning whether the restrictions would allow ‘sufficient flexibility for firms with high net worth or sophisticated customers’.

The regulator is looking at 'refining' the marketing restriction as the rules gave rise to 'a number of concerns, said head of investments policy David Geale (pictured) in a letter to the Association of Investment Companies (AIC):

‘Following analysis of responses, we are currently considering amending our proposals to exclude the following investment vehicles from the scope of the new marketing restriction:

·         Venture capital trusts

·         Real estate investment trusts

·         Exchange traded products

·         Overseas investment companies that would meet the criteria for investment trust status if based in the UK

He added he was ‘aware of concerns’ over restriction of EIS sales but that the FSA is considering the matter further before coming to a decision on whether they should be restricted.

The FCA Board will meet in April to consider the finalised rules.

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