A former IFA who was banned for incorrectly promoting unregulated collective investment schemes (UCIS) has warned an UCIS "arms race" is building up among some providers and advisers to pile investors into the high commission schemes before the introduction of the Retail Distribution Review (RDR).
Richard Rhys, who now works at claims management firm Rebus Investments helping advisers and investors who have advised on or been mis-sold UCIS, said a number of UCIS schemes that originally had closing dates for entry in March-2013 have switched them to close before the start of January, when the RDR rules banning commission come into force.
"It is an arms race to sell as much of this product [UCIS] as possible before RDR and to take the commission.
"There is a significant push to sell UCIS ahead of the implementation of the RDR, and investors will be rushed into them," he said.
Rhys is calling on the Financial Services Authority (FSA) to carry out an audit on all business written in the six months prior to 1 January 2013, the day the RDR comes into force.
"That would put an end to the rush we're seeing. Early intervention would settle the market."
A spokesperson for the FSA said the regulator is "conscientiously'" monitoring UCIS sales to ensure they are not being driven through without clear evidence of their suitability.
"We have UCIS under scrutiny, and we have drawn advisers' attention to our rules around them on a number of occasions," she said.
Rhys also called for better training of Financial Ombudsman Service (FOS) staff to deal with the influx of UCIS claims.
"We have concerns about inconsistent ruling at the FOS. There is no recognition that UCIS are incredibly complex, and no specialists dedicated to UCIS at the FOS.
"We have investors who have been in the FOS complaints system for two years when it says on its website that complaints will be dealt with in six months."
A spokesperson for the FOS said the service has specialists "across the board".
"We have ombudsman who look at UCIS regularly," he said. The FOS currently has 150 UCIS cases it is dealing with.
The FSA is consulting on banning the promotion of UCIS to retail investors.
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