Two elderly clients trapped in a suspended unregulated investment scheme have been offered an alternative Ucis fund by the company, but Martin Bamford has claimed this is unsuitable for them.
The managing director of Surrey-based Informed Choice said he had been put in an “impossible position” by tougher regulatory guidelines surrounding Ucis promotion.
This means he is concerned how to steer an elderly couple who had been told by another adviser to invest in the gated Traded Policies Fund run by Managing Partners Limited.
Last week it was revealed Mr Bamford’s new clients had been advised by their former IFA to borrow £750,000 against their home to invest in the fund, which invests in US life settlement policies, or so-called ‘death bonds’.
But they were unable to redeem their money because in April 2013, MPL put a freeze on all investor redemptions to preserve the fund’s assets against a possible rush for the door, after the FCA warned that Ucis had the potential to be “toxic”.
In January 2013, the FCA issued its 22-page policy statement, Restrictions on the Retail Distribution of Unregulated Collective Investment Schemes and Close Substitutes.
The document states: “Firms should note that, in the FCA’s view, promotion of a non-mainstream pooled investment to a retail client who is not a certified high-net worth investor, a certified sophisticated investor or a self-certified sophisticated investor is unlikely to be appropriate or in that client’s best interests.”
However, the FCA has drafted the marketing restrictions so existing investors are not left without access to ongoing advice in situations such as the one in which Mr Bamford’s clients have found themselves.
It also said: “Firms may continue to provide advice on existing investments and whether they should be retained or sold. The marketing restriction simply stops the promotion of further investment.”
Regulatory scrutiny culminated in the FCA issuing a marketing ban on such products.
Following Mr Bamford’s comments on 27 March, MPL announced it was setting up a switching facility to allow investors locked in the old fund to transfer into its Traded Life Policies Fund.
However, as this is also a Ucis, Mr Bamford said he did not feel comfortable advising his couple’s daughter, who is representing her parents, to take this route.
He said: “I can only lay out the pros and cons of the different options. I believe no IFA in the country would offer Ucis advice in this situation, given that this couple do not appear to be sophisticated or high net-worth investors.”
It is understood that Barclays, which provided the £500,000 leveraged loan for the couple’s investment, has agreed to suspend the couple’s repayments until MPL unfreezes the fund, but a spokesman for Barclays declined to comment on this.
Jeremy Leach, chief executive officer at MPL, said he could not comment on individual cases or the suitability of advice previously provided.
FCA Right to Reply
A spokesman for the FCA said: “The question of whether advisers should offer services to existing Ucis investors is a commercial one. The Ucis marketing restrictions were carefully drafted to allow existing investors to get ongoing advice, including whether the fund should be retained or sold.”
