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FSA probes six firms over unregulated product promotion
02 August 2010
The FSA's enforcement and financial crime division is investigating six firms over their promotion of unregulated collective investments (UCIS) to clients after a review of advice on such investments found the vast majority of firms have 'no idea' what their regulatory responsibilities are. The FSA said 11 firms have stop 'advising, arranging or otherwise promoting' UCIS or similar because of variations to their permissions. Its review found that a quarter of IFA firms are marketing unsuitable unregulated collective investment schemes (UCIS) to clients. The regulator has conducted a review of 187 IFA businesses, and said 66 had been selling UCIS schemes to consumers, and in 74% of the cases the sales had been unsuitable. It said IFAs were promoting the products to members of the public, despite statutory restrictions which forbid this. 'There is poor quality of advice, and poor risk management procedures to check whether customers are even eligible to be sold UCIS in the first place,' it said. The regulator said that because UCIS are not regulated by the FSA, advisers thought none of the FSA rules applied to them. It said: 'This is wrong. Advice to customers is a regulated activity.' The review follows earlier work by the FSA in 2009 which it said had flagged up a number of issues around the sale of UCIS products. The FSA said it had been concerned about a lack of awareness among IFAs of regulatory requirements for UCIS, and that it was concerned that advisers were marketing UCIS to clients not eligible to buy them. The FSA also criticised compliance consultancy firms for a lack of understanding around UCIS. It said: 'It was disappointing to see that some compliance consultancy firms were also unaware of the regulatory requirements surrounding UCIS. 'In some cases compliance consultancy firms have provided either no or inaccurate guidance to firms,' it said. The FSA has also produced a good and poor practice report to help firms understand the rules around advising UCIS. Published by CityWire
