Unregulated collective investment schemes

Some complicated investment opportunities are being unlawfully promoted and sold to members of the public. Find out why you should be wary of these unregulated collective investment schemes (UCIS).

A collective investment scheme (CIS) - sometimes known as a 'pooled investment' - is a fund that usually has several people contribute to it. 

The fund manager of a CIS will invest investors' money into one or more types of asset, such as stocks, bonds or property.

There are many types of collective investment schemes available to investors. They may be authorised UK schemes or 'recognised' schemes from other countries.

If a CIS is not authorised or recognised it is considered an unregulated collective investment scheme (UCIS). 

UCIS are not subject to the requirements that apply to authorised UK schemes and ‘recognised’ schemes from other countries in terms of their investment powers and how they are run. UCIS may invest in riskier assets or use riskier investment strategies than authorised or recognised schemes. 

While we do not regulate how UCIS are run, unless an exemption is available, we do regulate the promotion of these schemes in the UK and how UK firms can advise on or sell them.

You can check the Register to find out whether a collective investment scheme is authorised or recognised. Click on the 'Advanced search' link in the Register to search collective investment schemes. You can also check to see whether a firm is authorised to provide investment services in relation to UCIS.

Who can invest in UCIS

Unregulated collective investment schemes can be based inside or outside the UK. They often dedicate money to a range of different enterprises, including less common investment products and activities like film production, forest plantations and foreign property.

These schemes can’t be promoted to the public in the UK, but can be promoted to some specific types of investor subject to certain conditions being satisfied, including:

  • certified high net worth investors
  • certified sophisticated investors
  • self-certified sophisticated investors

Despite this, we have seen evidence that ordinary members of the public are being sold UCIS. Some customers are even being advised to invest their self-invested personal pension into a UCIS.

UCIS can be risky products. Investors may not have access to the Financial Ombudsman Service or Financial Services Compensation Scheme (FSCS) if things go wrong.

We are taking direct action against several firms and advisers involved in the promotion and sale of UCIS to ordinary members of the public.

Find out more about reporting a scam or a misleading financial promotion.

Protection against UCIS

Even if a UCIS is not authorised or recognised, the people carrying on regulated activities in the UK in relation to UCIS, will be subject to our regulation. These activities could include:

  • providing personal recommendations
  • arranging deals
  • establishing, operating and managing collective investment schemes

If you are advised to invest in a UCIS, your adviser should explain why the scheme is suitable for you. They should also make it clear why they are permitted to promote the scheme to you.

If you're not sure whether you fall into any of the groups mentioned above, you should ask your adviser to explain which category applies to you. Even if you've already been sold a UCIS, you can still ask the firm what eligible investor group you fall into.

If you are considering investing in a UCIS:

  • make sure you read all the available information
  • make sure you understand the risk that you may lose some or all of the money invested
  • ask your adviser what the charges are
  • ask your adviser what the rate of return is and whether this is an actual rate or only a target
  • ask whether you would have access to the Financial Ombudsman Service and Financial Services Compensation Scheme if things go wrong

If your adviser is not able to clearly explain the nature of the investment and the risk to you, then consider whether you fully understand what you are investing in.

Seek independent professional advice if you are in any doubt about the potential risk and returns involved.

Complain about a UCIS

If you believe that a UK firm has:

  • promoted or sold you a UCIS that is not suitable for you
  • promoted or sold a UCIS to you unlawfully, or without fully explaining the risks

You can make a complaint to the firm involved in the first instance. The financial firms we regulate must have a procedure in place for resolving disputes with their customers. These rules do not apply to overseas firms, who are not regulated by us. Find out more about how to complain.