The latest set of rules to limit the marketing of high-risk financial products to common investors comes after various investment scandals, which resulted in investors losing a huge sum of their money.
The new regulation restricts the sale of riskier and very complex fund to rich investors and high net worth individuals.
Investments products, including units in qualified investor schemes (QIS), traded life policy investments, units in UCIS, and securities issued by SPVs pooling investment in assets other than listed or unlisted shares or bonds, will be subject to marketing restrictions.
The watchdog claimed that many promotions of high end financial products violated the prevalent UCIS marketing restrictions, and only one in every four advised sales of UCIS to retail customers was suitable.
FCA policy risk & research director Christopher Woolard said, "Consumers have lost substantial amounts of money investing in UCIS and similar products in recent years so the need to introduce new rules to prevent this from continuing was essential."
The new rules will assist in protecting the majority of retail investors in UK from inappropriate promotions, while allowing the industry to market these risky, unusual or complex investment propositions to experienced investors, Woolard added.
Aimed to protect ordinary retail investors from the risks, the new rules does not limit the marketing of exchange traded products, overseas investment companies fulfilling the investment criteria, real estate investment trusts and venture capital trusts.
The regulator has ordered firms to ensure that promotional communications about these products are fair, clear and not misleading and investment advice must be given after checking client’s investment abilities.
