Unregulated collective investment schemes

An unregulated collective investment scheme (UCIS) is a type of collective investment scheme (CIS) and is a way that many investors can pool their money. It can be invested by fund managers in a variety of assets – such as holiday resorts, renewable energy, storage pods or units and parking spaces – with the aim of providing growth or income to be shared amongst investors.

A UCIS is not subject to the same requirements as a Financial Conduct Authority (FCA) regulated CIS – such as restrictions on the types of assets it contains – as it does not comply with the rules that would make it qualify for the different regulated fund categories. 

The FCA says that UCIS investments are generally not suitable for retail clients because of their speculative, high risk nature. These investments can only be promoted to a select group of individuals – certified high net worth investors, certified sophisticated investors, or self-certified sophisticated investors. And even where the individual meets the above criteria, the FCA has indicated these investments should only make up between 3-5% of the investor’s portfolio.

The FCA's website has further guidance on who can invest in UCIS and related activities that are subject to regulation. 

Many (but not all) of the complaints we see involve people's pensions. When people contact us to complain they tell us:

• they are concerned about the suitability of advice they received to transfer their existing personal pension to a self-invested personal pension (SIPP), for the purpose of investing in a UCIS.
• that their SIPP provider failed to carry out adequate due diligence checks before allowing UCIS investments to be held within the SIPP.
• about admin-related issues with SIPP providers that stem from the illiquid nature of these investments – for example not allowing the consumer to ‘cash in’ the investment – or that SIPP fees continue to be applied where there’s not enough cash held in the SIPP due to the majority of the consumer’s pension fund being tied up in UCIS investments.
• that the UCIS investments they have made have failed, meaning they have no value within the pension and so the consumer has lost the value of their investment, or they have not had the expected returns on the investment – such as income on hotel rooms or parking spaces.

As with any complaint, we’ll expect you to work with your customer to get to the bottom of what happened, investigate fairly whether anything went wrong, and – where appropriate – take steps to put things right.

If you don’t reply within the time limits for responding to a complaint, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.

Read more information about resolving complaints.

We’ll look at all the circumstances, including evidence provided by you and by your customer.

We’ll think about whether you did everything you were required to do, and if not, whether your customer lost out as a result.

In doing so we’ll consider relevant law and regulation, regulators’ rules, guidance and standards, codes of practice, and what we consider to be good industry practice at the time. We’ll then decide overall what a fair and reasonable outcome to your complaint is.

The Financial Conduct Authority expects financial businesses to take particular care to    ensure vulnerable customers are treated fairly. We’ll consider whether you were aware, or ought to have been aware, that your customer was vulnerable, and what support you offered or put in place.

Many of the cases we see involve retail clients taking out these investments, with the UCIS investments typically making up a large proportion of their entire pension fund.

Firms will often dispute our ability to investigate their involvement in arranging these investments on the basis that the investments aren’t regulated – or that they didn’t advise on the investments where an unregulated introducer was involved. Whilst the investment schemes themselves are unregulated, advising on or arranging such investment may itself be a regulated activity. And in the context of advising on pension transfers, the FCA has stated financial advisers cannot assess the suitability of a transfer without taking into account the overall investment strategy. So, in practice, advisers need to consider the suitability of such investments if advising on a pension transfer that is intended to facilitate investment in UCIS.  

Despite the FCA’s clear stance, we repeatedly see examples where advisers have recommended unsuitable UCIS investments in high proportions to retail clients – or recommended a SIPP in the knowledge that it will be used to hold these types of investments that have been promoted to the consumer by a third party.

If we find you have treated your customer unfairly, or have made a mistake, we'll ask you to put things right.

The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how the customer lost out – and our case studies below show some examples of this. We might ask you to put things right by making changes to a product or account, paying compensation for financial loss, or making changes to a credit file. Or we could ask you to do things differently for this customer in the future.

We may also ask you to compensate them for any distress and inconvenience they experienced as a result of the problem or mistake.

Read more about our approach to compensation.

If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. They can give general information on how the Financial Ombudsman Service might look at a particular complaint. They also offer guidance on our rules and how we work.

Find out how to contact our Business Support Hub.

If you’re a consumer looking for information on how we can help you with a complaint, you can read more about this in our dedicated information for consumers on complaints involving unregulated collective investment schemes.

To make a complaint to a financial business or to us, read more information about how to complain.