UCIS providers fight back

Alistair Mawdsley, managing director of Connaught Asset Management, explains what the FSA review of unregulated collective investment schemes needs to accomplish.

To say that the advice and promotion of unregulated collective investment schemes (UCIS) has been high on both the regulatory and media agenda over the last 12 months would be something of an understatement. Last year saw a number of fines issued against advisers with the regard to the promotion of certain UCIS products to clients the regulator deemed unsuitable.

This regulatory focus has recently culminated with the news that the FSA is planning a review into sales of UCIS in the early part of this year with the review’s findings to be published in quarter two 2012.

As an asset manager which offers a number of income funds which fall under the UCIS umbrella, we welcome this review fully and hope it can help clarify the questions that are repeatedly raised by advisers when it comes to this area.

It is certainly true to say that the perceived number of ‘grey areas’ around UCIS needs to be dealt with once and for all, simply because the misconceptions and myths that have grown up around the sector are not (in the end) good for anyone.

Specifically, the more clarity we can have around how UCIS funds ought to be promoted and exactly what type of clients are eligible to invest would be extremely positive, as would outlining just how this would continue to work in a post-RDR environment.

Clearly, with regard to the fines it has already issued, the FSA is already working to a certain regulatory agenda when it comes to UCIS. However, the first point we would like to see addressed is to go some way to segregating the different types of UCIS funds currently available.

Currently, UCIS is an extremely ‘broad church’ covering, for example, the type of funds we offer which are asset-secured funds paying 1% trail commission, all the way over to investments in tree plantations in South America which are paying in the region of 8% commission.

There are also all manner of UCIS funds in between and we believe it is important that the FSA does not place all funds under the same umbrella. One hesitates to use the phrase ‘tarring all with the same brush’ but we certainly believe there has been an element of this when it comes to defining UCIS.