Regulation  

Ombudsman agrees with adviser on unregulated holdings

Ombudsman agrees with adviser on unregulated holdings

The Financial Ombudsman Service has sided with a financial adviser after their client complained about being invested in a number of unregulated collective investment schemes.

The couple - known as Mr and Mrs D - complained about True Bearing Ltd, stating they received unsuitable investment advice and raised concerns about the suitability of advice they received to invest in a range of structured products.

But ombudsman Michael Stubbs said in the context of their whole portfolio, the 10 per cent investment in UCIS was not excessive.

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“Mr D is correct when he points out that there were restrictions on the promotion of this type of fund,” read his decision. “Many UCIS invest in very high risk unusual investments – but not all do.

“I don’t agree with Mr D’s argument that this type of funds, as matter of course, should not have been recommended to him. Mr and Mrs D’s portfolio had some exposure to high risk investments such as the New Earth fund.

“A medium risk portfolio can contain some exposure to higher risk elements. Looked at as a whole, I am satisfied that Mr and Mrs D’s portfolio was suitable for them.”

The complainants sought advice in February 2013 about investing the £2.35m proceeds of a share sale. They were described in the suitability report as balanced or medium risk investors.

The portfolio recommended had some modest exposure to high risk investments, such as New Earth Recycling, but the overall proportion was limited and it also had a £1m allocation to cash-based investments.

According to the suitability report, it was also made clear that the New Earth fund was considered high risk, but it noted the couple did not feel this was excessive.

In late 2009, after taking initial advice, Mr and Mrs D invested in a range of structured products.

Following a review of their UCIS holdings in 2011, they were made aware of UCIS and the issues surrounding them.

By February 2013 Mr and Mrs D had total investments of over £3m and the overall proportion of their wealth invested in UCIS was around 10 per cent, with 3 per cent in New Earth.