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Underneath the mistletoe… UCIS review due in 2012

09 December 2011

Another Christmas treat the industry will be glad to put off until the New Year was revealed by the publication of the FSA's Board minutes for July.

The FSA is to conduct a review into the sale of UCIS; set to be published in the second quarter of 2012.

The review is confirmed in the minutes for the July meeting of the FSA board (at page 5). It appears the FSA has concerns about UCIS selling practices and the clarity of descriptions of exemptions in the rules. The focus of the review will likely be on:

  1. The categories of investors to whom UCIS funds could be promoted;
  2. How adviser knowledge of UCIS will affect independence post-RDR – an issue which has been raised repeatedly recently.

This news is perhaps unsurprising.  In recent months, a number of advisory firms and individuals have been fined and/or had their permissions varied over failings in relation to the promotion and (to a lesser extent) the sale of UCIS, confirming this as an area of great concern for IFAs and the FSA alike.

The first signs of the FSA's response to its wealth management review (in its press releases relating to the Final Notices against Credit Suisse UK and Coutts) suggest the UCIS review may go hand in hand with further fallout from the 'Dear CEO letter' requiring firms to confirm the suitability of their portfolio recommendations.

In recent weeks, the FSA has raised numerous concerns about the selling practices for a number of products. Traded life policies were last week retrospectively classified by the FSA as "toxic"; compensation for Arch Cru investors is high on the agenda after the FOS published a provisional decision which was relied on by the FSA when talking to MPs; and a large number of IFAs have been served with claims for damages by the FSCS in relation to its Keydata payouts.

It seems that as the FSA focuses on its legacy, IFAs and wealth managers need to be increasingly prepared to face scrutiny of their practices and advice. In light of the impending review, although little can now be done about past sales, it is all the more important for advisers to make sure their UCIS sales processes are in order.