What is a UCIS?

Investors in the UK are familiar with being sold “Pooled Investments” or Collective Investment Schemes (CIS). Regulated CIS are those that are authorised or are non-UK CIS that are FSA recognised. The FSA recognition enables overseas CIS to be marketed to the public in the UK and they will only recognise an overseas scheme if certain specified criteria are met. If the scheme fails these criteria for any reason they are not recognised as a CIS and it is therefore Unregulated CIS or UCIS.

You can check whether the scheme is authorised or recognised by us using the CIS search facility on the online Register.

UCIS use rising

UCIS can be based outside the UK and dedicate money to a range of different enterprises, including less common investment products and activities like film production, forest plantations and foreign property.

These unregulated schemes cannot be promoted to the general public in the UK, but can be proposed to certain limited categories of investors.

Scheme promotions may be made under the rules of COBS 4 to a section of the public including:

• certified high net worth investors;
• sophisticated investors;
• self-certified sophisticated investors; and
• existing investors in UCIS.

So what is required?

Some examples of good practice are likely to include where a firm;

• Has a clear and documented sales process.
• Has a good understanding of what constitutes ‘promoting’ and is aware that it does not solely mean communicating through a written financial promotion, (e.g. marketing literature, email or letter) but also includes verbal communication, (e.g. face-to-face discussion, providing advice, etc.)
• Uses the exemptions under COBS 4.12 for specific persons for whom the firm has taken reasonable steps to ensure that investing in the collective investment scheme is suitable. They adequately assess their customer’s personal and financial circumstances as well as their knowledge and understanding to ensure the customer is eligible for promoting UCIS.
• Keeps a record of exemptions which they were relying on when promoting a UCIS, and the reasons why they apply. They provide their customers with written explanations as to why their personal recommendation was suitable.
• Use the exemptions under article 21 of the PCIS order for high net worth individuals and retain a copy of statement of a high net worth individual, in a prescribed text and format and dated before promoting UCIS began.
• Obtains and retains full KYC, including the customer’s assets, other investments and their underlying assets; their objectives and needs for immediate income, their knowledge and experience in the investment field relevant to the specific type of investments or service; and attitude to risk (ATR) specifically covering capacity and tolerance. The firm uses this to establish the customer’s eligibility for the promotion of UCIS.
• Issues a written confirmation and highlights all the risks, costs and charges pertinent to their recommended product and its underlying UCIS and clearly explained why UCIS is suitable for the customer. They also explain that UCIS are not regulated, that the customer will not have cancellation rights, and may not be covered by the FOS should they have a complaint about the fund or the FSCS should they need to seek compensation.

More information concerning UCIS can be found at the FSA

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