In April 2012, the Financial Services Authority (FSA) issued guidance to regulated firms regarding traded life policy investments (TLPIs). The guidance asked firms to re-examine their sales of these products to check their compliance with our rules and principles.
We are now reminding those firms that advised clients to invest into the EEA Life Settlements Fund to re-examine their sales.
The EEA Life Settlements Fund is an unregulated collective investment scheme made up of TLPIs, based in Guernsey and previously listed on the Channel Islands Securities Exchange.
TLPIs are investments in life assurance policies, typically of US citizens. We believe TLPIs are complicated products that are generally unsuitable for the mass retail market.
Our 2012 review of sales in the TLPI market revealed high levels of unsuitable advice. As a result, we recommended that these products should not reach the vast majority of ordinary retail investors.
In January 2014, we imposed rules banning the promotion of these products to most retail investors.
TLPIs are usually marketed as offering strong returns that are unrelated to stock market performance, which makes them appear attractive at a time when more traditional investments are not doing well.
However, TLPIs are high-risk investments. In particular:
In April 2012, we published guidance which highlighted significant problems with the way TLPIs were designed, marketed and sold to UK retail clients. In that guidance we told firms:
“If firms identify problems or compliance failures, we expect them to have regard to Principle 6 (‘A firm must pay due regard to the interests of its customers and treat them fairly’) and consider whether they ought to act on their own initiative regarding the position of customers who may have suffered detriment from, or been potentially disadvantaged by, such failures.
This may include a review of client files by advisers, and firms with investments that include a component in a TLPI reviewing their holdings. Customer detriment may have arisen from a number of causes: if a firm reviews its previous transactions and identifies that it has breached any regulatory requirements, it should consider whether it is liable to the customer for any of the detriment or loss suffered.”
Firms that recommended to their clients that they invest into the EEA Life Settlements Fund should check that they have followed our 2012 guidance. If firms have not yet acted on the 2012 guidance, they should do so now.
Action is important as we believe some investors may be disadvantaged if firms have not already reviewed past sales. The circumstances will be different for each investor, but some may face a deadline on when to make complaints.
Firms that uncover problems with sales of investments in EEA Life Settlements Fund should contact their affected customers and should consider whether, and how much, redress is appropriate.
Where significant mis-sales are discovered, firms should also contact their supervisor at the FCA.
If firms do not act on our guidance, they may be failing to pay due regard to the interests of their customers or to treat them fairly, which could lead to regulatory action.
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