The FCA, like the FSA, continues to have an interest in the promotion of unregulated collective investment schemes (UCIS) – see e.g. FCA Risk Outlook 2013 covered in Regulatory Roundup 47.
The latest to suffer the Regulator’s wrath are John Leslie and Jeffrey Bennett. In addition to each having a £28,000 financial penalty imposed upon them they have also had their respective Approved Person status withdrawn and, by means of Prohibition Orders, they are both banned from performing any significant influence function (basically any Controlled Function except for the CF30 customer function).
At the core was a failure to ensure that there were proper systems and processes in place to prevent the promotion of UCIS to approximately 2,900 retail investors without an adequate assessment having been made of their eligibility to receive such material.
It didn’t help the cases of Mr Leslie and Mr Bennett that the approximately 880 investors who decided to invest €38m in the three property development UCIS on a non-advised basis are now probably holding worthless investments.
The current rules on the promotion of UCIS are set out in COBS 4.12 (the reference in the Final Notices to ‘COB’ reflects the fact that the transgressions occurred back in 2005) but are due for a shake-up.
This serves as a timely reminder to firms that the revised rules on the distribution of UCIS and ‘close substitutes’ (‘non-mainstream pooled investments’) take effect from 1 January 2014. In addition to UCIS the rules, which also include record keeping requirements, will also capture vehicles such as certain securities issued by SPVs and Qualified Investor Schemes.
It is therefore important that relevant firms should have reviewed their current processes and procedures to ensure that they will remain compliant. A summary of the new regime can be found in Regulatory Roundup 49 from which it will be noted may also have an impact on discretionary portfolio managers.
