Several bridging lenders are funded either partly or primarily by UCIS schemes, which the FSA has said are being mis-sold to retail investors who don’t understand the risks attached.
Montello Finance, West One Loans and Tiuta are just three lenders who rely partly on this type of funding.
But both West One and Montello have said the proposed ban on promoting UCIS to retail investors won’t affect their funding lines.
Mark Abrahams, CEO of West One Loans, said: “We don’t believe the ban will have any impact on West One Loans since our investors are not ordinary retail investors.”
And Christian Faes, managing director of Montello, said: “We were surprised to see this headline from the FSA, as we assumed that everyone already knows that UCIS should only be promoted to sophisticated investors or high net worth individuals.
“The Montello Income Fund is a UCIS and funds part of the Montello group loan book. However, all investors in the Montello Income Fund are carefully vetted and a lot of care is taken by the IFAs that use the fund to ensure that only qualifying investors have access to it. Its pretty obvious to the professionals that we partner with that this is not an investment meant for retail investors.”
The FSA’s proposed rules published earlier today mean that in the retail market promotions will generally be restricted to sophisticated investors and high net worth individuals for whom the products are more likely to be suitable.
Currently UCIS can be promoted to ordinary retail investors if an adviser first assesses the product’s suitability.
In effect, today’s consultation paper should prevent firms from marketing UCIS to ordinary retail customers, even in the context of financial advice.
The consultation paper follows on from extensive work undertaken by the FSA, which found that only one in every four advised sales of UCIS to retail customers was suitable, taking into account the customer’s needs and requirements.
Tiuta, which until recently was partly funded by UCIS funds at Connaught Asset Management, declined to comment.