UCIS

Misselling of Unregulated Collective Investment Schemes

There has been widespread mis-selling of Unregulated Collective Investment Schemes (“UCIS”).  In June 2013, the Financial Conduct Authority banned the promotion of them but there are many investors who have already suffered from their sale.

Before the ban, UCIS were not allowed to be promoted to the general public and could only be promoted to certain categories of investors including certified high net worth investors and sophisticated investors.  In some cases, however, there was insufficient consideration by the financial advisor of whether the product was suitable for the particular investor and there was insufficient emphasis on the risks which included:-

  • As UCIS were not regulated by the FCA the investor did not have many of the protections that would otherwise be available.
  • Recourse could not be had to the Financial Ombudsman Service.
  • Compensation could not be obtained from the Financial Services Compensation Scheme.

In 2010 the FCA reported that in 96% of cases, UCIS were being incorrectly promoted; that in 52% of cases, the advice given was unclear and that in 22% of cases, the UCIS was unsuitable for the investor.  Allegations include that advisors may not have sufficiently balanced the clients’ risk appetite with the risks involved and may have sold the investment to clients who did not match the suitability criteria.

Issues that may arise are not only those of the mis-selling of financial products but also professional negligence. Advisors will often have cover for claims under their insurance policy but where investors have claims, they should be aware of the six year Limitation Period for starting Court proceedings (correspondence or a complaint is not enough to stop a claim being time barred). Early legal advice should always be obtained. 

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