JUNE 2011 |
www.opp.org.uk WORDS | Geoff Hadwick Stand up to the FSA
Britain’s Financial Services Authority (FSA) is starting to crack down on unregulated collective investment schemes as a series of prosecutions emerge. And the country’s Business Secretary Vince Cable has been busy condemning the fraudulent use of SIPPs (self-invested personal pensions) for tax avoidance. What does the overseas property sector need to know to stay out of trouble? Fight back now says legal expert John Howell.
he picture could not be clearer. “We have found evidence that some complicated investment opportunities are being unlawfully promoted and sold to members of the general public,” says the UK’s fi nancial watchdog, the FSA. “With most savings accounts now
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offering less than 3% interest, people may be tempted to consider different investment opportunities in the hope of a higher return,” adds the FSA, in an attempt to explain the rapidly increasing popularity of such schemes. The FSA defi nes a collective investment scheme as “a pooled investment … a fund that several people contribute to. A fund manager will invest the pooled money in one or more types of asset, such as stocks, bonds or property.”
And “there are many types of CIS available to investors with schemes that we regulate, including authorised UK schemes and ‘recognised’ schemes from other countries,” the authority adds. “If a CIS is not authorised or
recognised it is considered an unregulated collective investment scheme (UCIS). UCIS are not subject to the same restrictions in terms of their investment powers and how they are run.”
Even though the authority is clear that “UCIS packages can be based outside the UK and dedicate money to a range of different enterprises, including less common investment products and activities like fi lm production, forest plantations and foreign property,” it is very worried that investors are being seriously misled.
“These unregulated schemes cannot be promoted to the general public in the UK,” says the FSA, “but can be proposed to certain limited categories of investors including:
• certifi ed high net worth investors; • sophisticated investors; • self-certifi ed sophisticated investors; and • existing investors in UCIS.” The problem is that “despite this rule we have seen evidence that ordinary members of the public are being sold UCIS,” warns the FSA, “with some customers being advised to invest their self-invested personal pension (SIPP) into a UCIS.”
And, says the FSA, the authority is worried that “this is not recommended for most people as UCIS, by their nature, are risky products and because we do not regulate them, investors may not have access to the Financial Ombudsman Service (FOS) or Financial Services Compensation Scheme (FSCS) if things go wrong.” Today, says the FSA, “we are taking direct action against several fi rms and advisers involved in the sale of UCIS to members of the general public.” Their concerns are shared by UK
Business Secretary Vince Cable who is looking into the matter too, worried about illegal practices and tax avoidance. A recent letter from a former
independent financial advisor called Keith Williams to Cable highlighted the case of a 77-year- old Briton who lost £100,000 from a UCIS SIPP investment. In his response, Cable said he was concerned by the use of UCIS in SIPPs, and that he had forwarded his concerns to the Financial Secretary to the UK Treasury, Mark Hoban. According to Williams “there is concern in some quarters about unregulated investments being hyped up via the tax relief banner, which fails to disclose the high level of risk that are attached to some of them.” John Cassey, UK head of fraud and
Fight for your industry on Wednesday June 22
The overseas property sector is under threat and needs to take the investigation currently being planned by Britain’s Financial Services Authority (FSA) into unregulated collective investment schemes (CIS) very seriously indeed says OPP legal columnist John Howell. He is calling for the industry to hold “an urgent seminar” on the subject
because “the whole campaign and the attitude behind it could have a terrible and devastating impact on the UK arm of the overseas property industry and the way in which it sell investments.” Howell is calling for interested parties to come forward and propose
delegates for a meeting in central London on Wednesday, June 22 2011. OPP has already agreed to support the event. He wants the industry to discuss the implications of the FSA attack and decide how it should respond. Fight back now or face the possibility of losing control of the way in which
you business is allowed to sell overseas property investments, says Howell. Please email John Howell directly at
john@jhco.org or OPP via
geoff.hadwick@richmondgreengroup.com if you would like to take part. There will be a nominal charge to pay for the hire of the meeting venue.
NEWS ANALYSIS
INVESTMENT | 45
Fingered | The number crunchers want to tighten their grip on overseas property
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