But its firmer stance, which was revealed in a consultation paper published last week has been taken because the FSA’s findings show current rules are not being followed and because it perceives the products are not typically suitable for retail investors, TCC continued.
So what should you do in preparation for the final guidance on the topic? And how should you treat Ucis investments already held by clients? Here are five key steps prepared by TCC:
1. Review your existing Ucis sales
If you have previously promoted and/or sold Ucis to your customers, you need to take some time to check your records. We suggest you identify all historical sales and ensure you have documented suitability and appropriate checks in place.
Then based on the FSA’s findings outlined in the paper, apply an overlay to determine any possible detriment from where suitability is lacking where you have not categorised a customer correctly, or any other reason why existing rules have not been met.
2. Update your compliance procedures
You will be expected to amend your internal procedures in order to comply with the rules changes. This includes updating your client classification framework, appointing a compliance director to confirm adherence to the promotion restrictions, enhancing your record keeping, updating literature and training staff on the rules change.
3. Consider how to treat customers who have existing Ucis investments
Customers who are already exposed to Ucis are not covered by the proposed changes for their existing holdings. You are free to advise them to remain invested or to transfer to a more mainstream investment as you see appropriate. However any recommendation to those customers to invest further in Ucis would be covered by the rules changes.
4. Understand how this affects the rules on independence under RDR
In relation to RDR you do not need to consider Ucis for ordinary retail customers in order to meet the standard for independent advice. This is because the FSA has already identified these products as high risk and has recommended that they should not reach retail investors in the UK. You would only have to consider (although not necessarily recommend Ucis if you deal with clients who are eligible to receive promotions of these investments.
5. Read the Consultation Paper and respond if you feel necessary
This is only a high level summary of the proposed changes. If you have been, are, or even intend to be involved in the distribution of Ucis, you need to read the consultation paper carefully and make sure you understand how it impacts your business.
