InvestmentsFeb 12 2013

FSA: EISs still face possible retail sales ban

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The FSA is rethinking its ban on the marketing of some investment products as part of restrictions on Ucis sales, but has highlighted enterprise investment schemes (EISs) as needing further consideration.

Draft rules published in CP12/19 proposed a ban on the promotion of unregulated collective investment schemes (Ucis) and “close substitutes” to retail investors. This sparked concern in the industry that certain investment vehicles would become beyond the reach of ordinary investors, despite attractive tax incentives, and damage the market for such vehicles.

In a letter to the Association of Investment Companies (AIC), the FSA said it was considering amending its proposals to exclude venture capital trusts (VCTs), real estate investment trusts (Reits), exchange traded products (ETPs) and overseas investment companies that would qualify as an investment trust if they were based in the UK.

However, the letter stated that EISs and seed EISs – which have similar tax advantages to VCTs but are investment schemes rather than trusts – are still being looked at.

“We are also aware of concerns in relation to other products, such as, for instance, enterprise investment scheme funds and seed enterprise investment scheme funds,” it said. “It is important to find the right balance between consumer protection and choice so we are also considering these issues further.”

The letter confirmed that a policy statement on the issue is planned for April, with sufficient time given for firms to implement the new rules.