New Ucis rules: Playing with fire


    Products which are NMPIs can only be marketed to permitted recipients as follows:

    • Replacement products and rights issues - existing participants or holders of an NMPI can be marketed an NMPI which is intended to absorb or replace that NMPI or which is part of a rights issue. This is similar in effect to current category 1 from Cobs 4.12 with the significant exception that it will no longer be possible for a firm to market to a person a scheme solely on the basis that its underlying property and risk profile are substantially similar to that of a scheme in which the person is already invested or was until recently invested.

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    • Certified high net-worth investors - can be marketed any NMPI likely to be suitable for them based on a preliminary assessment of their profile and objectives.

    • Eligible employees – can be marketed investment in their employer, as currently.

    • Non-retail clients – any NMPI can be marketed to this category of customer if it is an investment in relation to which the client is categorised as professional or eligible counterparty.

    • Certified sophisticated investors – any NMPI can be marketed.

    • Self certified investors – any NMPI considered suitable on a preliminary assessment of the client’s profile and objectives.

    • Solicited advice – any NMPI provided the client has requested a personal recommendation for advice on the merits of advising in that NMPI and has not previously received a communication or promotion influencing that person.

    • Other excluded communications – any person to whom promotion would be exempt under the Ucis order (for example, investment professionals).

    Some of the categories above are the same as the old Cobs 4.12 but there are gaps. In order to achieve the FCA’s aim that Ucis may only be marketed to high net-worth and sophisticated individuals current category 2 has been removed and it will no longer be possible for firms to market to customers solely based their being a client of the firm for whom the firm has taken reasonable steps to ensure the scheme is suitable. Marketing can only take place if the individual customer is in another category – that is, high net-worth or sophisticated.

    For financial advisers providing advice or dealing services to retail the key exemptions will be those based on the net-worth of their customers. This means putting in place robust and appropriate procedures to ensure that the exemptions are applied properly, as well as undertaking a preliminary assessment of suitability for the customer where that is required.