The Financial Conduct Authority (FCA) has not included two influential investment mediums in its list of banned products in new marketing rules for Unregulated Collective Investment Schemes (UCIS).
Both Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs) have escaped the ban following a consultation.
The consultation followed research conducted by the Financial Services Authority (FSA), the predecessor to the FCA.
David Mott, managing partner at Oxford Capital Partners, says that the decision reflects the FCA recognising the importance of EIS in channelling capital to small business, and for investors and their advisers to use EIS as a part of holistic financial planning.
Mott adds, ‘The government has made EIS a central plank of its policy to channel much-needed investment to growing UK enterprises.
‘The FCA’s decision not to restrict the promotion of EIS by advisers shows that joined up thinking across policymakers and regulators can deliver the right result for entrepreneurs, investors and their advisers.’
On the back of the consultation and subsequent decision, EIS schemes, exchange traded products, overseas investment trusts, real estate investment trusts and VCTs will still be allowed to market to private investors.
More on EIS and VCTs:
However, the promotion of other UCIS and closely related schemes will be restricted to institutional, sophisticated and high net worth investors only.
Guy Myles, managing director at Octopus Investments, comments, ‘The FCA has accepted that there’s a fundamental difference between what it considers to be risky, unregulated investment products and those it sees as being “higher risk” in nature, but which already have strong corporate governance measures in place.
‘This is an outcome that Octopus lobbied hard for. Although we knew that our EIS products, as discretionary managed investments, fell outside the scope of the proposed restrictions, in the case of VCTs we felt there was a strong argument that an exclusion from the restrictions was in the best interests of UK investors.’
