Sadly, the FCA has shown that when it comes to missing the target it is every bit as capable as its predecessor – as recent pronouncements on the matter of sales of Unregulated Collective Investment Schemes (Ucis) clearly demonstrate.
First, it re-affirms that Ucis sales are ‘good to go’- as long as they are to ‘sophisticated’ clients. So far, so good.
Then, however, it suggests that firms can classify retail customers as sophisticated if they believe they understand the risks – and get the customer to sign some disclaimer.
Setting such a subjective test throws the door wide open to abuse by any, less-than-ethical, IFA. In his desperate pursuit of a lucrative Ucis sale, an adviser may come up with all sorts of ingenious arguments to support his ‘belief’ that this was a sophisticated punter. As for the disclaimer document, any skilled adviser should have sufficient communication and ‘trust-engenderment’ skills to scoot past that hurdle.
Clients rarely read the declarations they sign anyway and an adviser well-versed in doing so can persuade a hapless client to sign almost anything – especially when ‘guaranteed high returns’ are on the table.
Instead of trusting to advisers to make the judgement call, the regulator should develop a series of objective parameters by which the term sophisticated can be measured.
Ivor Harper is director at Park Financial
