10 | OPP RESPONSE


to the public: if you buy in these circumstances, you enjoy protection. If you buy in these you do not. This would be helpful to our industry and serve the needs of public protection.There is a danger of a wholesale “rush to the bottom”, with everyone seeking solutions that are not caught by any effective regulation. Whilst this might tick your box – everyone legally obliged to comply with UK legislation is doing so – it cannot be helpful to the broader aim of protecting the public.


3. Are there any investments caught by the non-mainstream pooled investment defi nition in the draft rules that you believe should not be?


Everything depends upon your


defi nitions of – and the attitude taken by your enforcement teams in respect of – the words “unusual”, “speculative” and “complex”.


Once again, our plea would be for


clarity from the outset: guidance as to the sort of investments likely to be treated as properly described by these terms and caught by the rules. We also still need meaningful


and useful guidance – written in the context of our industry – as to what is and is not likely to be a UCIS. This has been requested many times and over several years. Sadly, some of the more cynical in the industry have formed the view that lack of clarity suits your purposes; it allows you to threaten to ‘take down’ people operating (as they see it) well on the right side of the borderline between the legal and the illegal, relying upon their inability to fi ght an organisation of your size and power.


5. Do you agree that fi rms should still be able to promote replacement UCIS to retail customers where the original product is being replaced or liquidated? No.


Replacing dangerous rubbish with other dangerous rubbish is seldom a good idea. The promotion of any replacement item should have to be justifi ed on the same basis as any new promotion.


6. Do you agree that we should remove the ability of fi rms to promote UCIS under COBS 4.12.1R(4) category 2? No.


If a properly licensed IFA is satisfi ed that the investment is suitable for their clients, why should they not promote it? If the investment is a ‘bad’ investment, they should not be advising it. If they do, their indemnity insurance provides the proper remedy – backed up by disciplinary action if appropriate. You seem to be suggesting that


FSA This perception, even if entirely


untrue, does not enhance relations with the FSA and encourages an entirely unhelpful – but understandable – wish for companies to keep their heads down rather than engage with you is a sensible discussion as to what is right and what is wrong.


If nothing else comes out of this consultation paper, the initiation of a sensible discussion would benefi t everybody.


4. Do you agree that we should remove the general ability of fi rms to promote UCIS under COBS 4.12.1R(4) category 1? Yes


www.opp-connect.com | DEC 2012/JAN 2013


you wish to withdraw this provision because your IFAs are not following the existing rules. If that is so, it is your responsibility to do something about that failure.


What is the point of having authorised and regulated fi nancial advisers if they cannot advise? If they are not following the rules then the proper response is training and enforcement.


It is true that most of the people to whom a fi rm would be likely to make


“What is the point of having authorised and regulated fi nancial advisers if they cannot advise?”


such recommendations will be HNWIs & SIs, and so permitted promotion targets under these rules, but there could well be exceptions and the very principle of restriction as an easy way out of enforcing compliance is bad.


7. Do you agree that we should remove the exemption in COBS 4.12.1R(4) category 8? No.


For the same reasons. You could, however, tidy up the wording by adding the word ‘unregulated’ where needed.


8. Do you agree that we should limit the ability of fi rms to promote QIS, securities issued by SPVs and TLPIs in the retail market? We agree that this area is full of danger. We perceive the problem with your proposal to be that, if you outlaw these specifi c devices, new ones will be used or invented to get round the rules. The aim is laudable. Would it not be better achieved by a general anti avoidance measure – ‘if it looks like a cow and it moos…’


9. Do you have any comments or suggested improvements for our approach to SPV-issued securities, including structured products? The writer has never understood why something, clearly in substance a UCIS, was excluded from the rules merely because it was sold through the structure of an SPV.


If the product is a UCIS it should be caught by the rules, whatever suit of clothes it is dressed in. It than then be promoted to suitable investors but not to others.


10. Do you have any comments on the Handbook guidance we propose to add regarding the use of exemptions in the FPO and PCIS Order? No.


Clarity | The FSA’s regulations need to be more clear, in OPP’s opinion


11. Do you agree that we should require fi rms to retain a record of the


basis on which the promotion of a non-mainstream pooled investment has taken place for each fi nancial promotion? Yes.


12. Should we require confi rmation of compliance with the marketing restriction for each promotion? Yes.


13. Do you agree that the CF10 individual is the correct person to confi rm compliance? Yes.


14. Do you have any comments on the Handbook guidance we propose to add regarding the link between promotion and advice? No.


15. Do you agree with our proposed update to the retail investment product defi nition?


This is outside our fi eld of experience, so no comment.


16. Do you have any comments on the impact of our proposals on existing customers and the distributor fi rms serving them? No.


17. Do you have any comments on our analysis of non-mainstream pooled investments? Yes. See Q1 above.


18. Do you have any further data on the size of the market? No.


19. Do you have any comments on our overall strategy to deal with the risks to retail customers of investing in UCIS? Yes. Although our industry is, largely,


unaffected by your proposals as the sale and promotion of pure real estate is not covered by your rules, there are some areas where our two worlds collide – sometimes with apparently strange and surprising results. These include, for example, the


sale of units in a hotel – currently a popular investment because of solid long-term rental yields – where much seems to depend upon whether the management of the hotel results on you receiving a share of the overall income of the hotel or just a percentage of the income generated by your particular unit. This has the apparently perverse


effect that the better run hotel (almost every successful hotel manages its accommodation by letting – and heating and cleaning – only a part out of season and pools the income generated to reward owners equally) may be regulated whereas the more amateur and less profitable approach may not.


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