The Financial Services Authority (FSA) says its concerns over unregulated collective investment schemes (Ucis) extend beyond advisers to Ucis providers and promoters who “encourage” mis-selling later in the product chain.
The regulator has published its Retail Risk Conduct Review today, which sets out the areas the FSA sees as concerning in the retail investment market.
The FSA says Ucis are designed for institutional investors but are being being sold to retail investors for whom the product is inappropriate.
It says it now has evidence Ucis products are increasingly being missold to customers.
However, the FSA says it has also concerns about how firms’ behaviour further up the product chain is contributing to the risk of Ucis being missold. (article continues below)
The FSA says: “These concerns include providers and promoters targeting Ucis at retail intermediaries in ways that encourage missales later in the value chain.
“They also include firms making Ucis available to the retail market without conducting sufficient due diligence or establishing appropriate systems and controls to guarrd against the funds reaching the wrong consumers.”
The FSA is also concerned about insufficient product governance controls at firms that establish, operate and manage Ucis funds to ensure customers are treated fairly.
The regulator says it has taken forward enforcement cases against Ucis providers.
It will be carrying out a review of Ucis rules later this year.