LONDON The Financial Conduct Authority (FCA) said on Tuesday it would no longer allow some high risk investment schemes to be promoted to the vast majority of UK retail investors.
Publishing final rules to ban the marketing of unregulated collective investment schemes (UCIS) and non-mainstream pooled investments (NMPIs) to consumers, the FCA said these often complex fund structures had cost many of them "substantial amounts of money".
The move, which will restrict the marketing of products such as traded life policy investments, or "death bonds", is part of the regulator's attempt to control high-risk product sales after a series of investment scandals.
After a lengthy consultation, the regulator said only one in every four advised sale of UCIS to retail customers was suitable and many promotions breached even existing marketing restrictions. A number of NMPIs had also failed completely, with customers losing their total investment.
Under new rules, "sophisticated" investors and high net worth individuals, will remain eligible for these products, however.
"This announcement marks a clear line in the sand that the regulator wishes to impose between retail and non-retail investors," said Monica Gogna, a lawyer at Pinsent Masons.
"However, the question remains as to whether, in time, this willingness to ban products may lead to a real block on product innovation, which can also potentially cause detriment to the consumer."
The FCA said the marketing restrictions would not affect exchange traded products, some overseas investment companies, real estate investment trusts, venture capital trusts, enterprise investment schemes and seed enterprise investment schemes, unless structured as UCIS.
But it might impose similar marketing restrictions on a range of new securities - including contingent convertible bonds (CoCos), building society deferred shares and similar instruments - which have been offered to retail customers.
It said many carried risks unfamiliar to and inappropriate for many ordinary retail investors. It said it plans to launch an industry consultation.
(Reporting by Kirstin Ridley, Editing by Sinead Cruise)