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February 12, 2013 5:39 pm
Fund managers and property companies have welcomed news that the Financial Services Authority (FSA) is likely to narrow a proposed ban on marketing complex investments to retail customers.
Last August, the regulator announced a clampdown on the promotion of unregulated collective investment schemes (Ucis) to individual investors. Schemes affected included venture capital trusts (VCTs), real estate investment trusts (Reits), and certain exchange-traded products.
Since then, the move has been strongly opposed by investment managers and property groups. The British Property Federation described the classification of Reits as Ucis “absurd”, while the Association of Investment Companies (AIC) said a marketing ban would be of “significant detriment to the VCT industry”. Bestinvest, the broker, said such a ban could cut VCT fundraising by 75 per cent.
However, David Geale, head of investment policy at the FSA, has now written to the AIC to say it is considering a change to its proposals, which would exclude VCTs, Reits, exchange-traded products and offshore investment trusts from the new rules.
He said it was “important to find the right balance between consumer protection and choice”.
The regulator is also evaluating concerns over a proposed marketing ban on enterprise investment schemes, and new ‘seed’ enterprise investment schemes.
In response to the FSA announcement on Tuesday, the AIC said: “This rethink follows a constructive process of engagement, and the AIC is pleased that its concerns over the FSA proposals have been recognised.”
VCT managers said it would have been wrong to classify their government-backed, tax-efficient schemes as high-risk unregulated investments.
“The FSA has listened to reason,” said Patrick Reeve, managing partner at Albion Ventures VCT managers. “VCTs should not be put in the same basket as other riskier investment products. As well as benefiting from strong standards of corporate governance and publicly listed shares, VCTs have demonstrated 17 years of successful returns to investors.”
The British Property Federation also reacted positively. Liz Peace, chief executive of the BPF, said: “Reits are not ‘close substitutes’ to unauthorised investment schemes, nor are they ‘non-mainstream’ investments. Indeed, one of the government’s main aims in introducing the Reit regime was to facilitate investment in commercial real estate by the man on the street.”
The FSA said the final proposals will only be confirmed once the Financial Conduct Authority (FCA) board has considered them in April. It suggested that it may then take another year before the rules take effect.
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