VCTs escape as watchdog bans risky investments
Buying into an exotic product like timber or wine is now off limits
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.It may be bolting the stable door after the horse has bolted but the UK's financial watchdog has finally decided to ban the promotion to the public of high-risk unregulated investments. The Financial Conduct Authority will stop riskier and complicated fund structures that can invest in more exotic areas, like timber and wine, being offered to the vast majority of people.
The ban on marketing these so-called "Unregulated Collective Investment Schemes" and similar products follows research which shows that only one in every four advised sales of these Venture Capital Trust investments were actually suitable.
The watchdog said a number of these types of products have completely failed in recent years, seeing investors lose all their capital. Sales of these complex funds and similar products to retail investors have hit around £4bn in the UK, the FCA said.
However, many have lost millions of pounds by falling victim to high-risk toxic investments like the traded life policy investments previously offered by the defunct firm Keydata.
"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," says Christopher Woolard at the FCA.
"We believe these rules should go a long way in helping to protect the majority of retail investors in the UK from inappropriate promotions while allowing the industry to market these risky, unusual or complex investment propositions to experienced investors."
Yet there has been debate over the investments the watchdog should clamp down on and some were concerned outright bans would unnecessarily limit product choice. But the FCA has clarified that the ban does not affect exchange-traded products, real estate investment trusts, venture capital trusts or enterprise investment schemes, as well as types of overseas investment companies.
Mark Dampier at Hargreaves Lansdown welcomed the move to exclude VCTs, as they "are effectively like investment trusts and a ban would've been strange."
Emma Dunkley is a reporter at Citywire.co.uk
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments