FSA Criticised for its Comments Regarding TLPIs
Following a suspension of trading on the EEA Fund Management’s Life Settlement Fund at the close of 2011, which was an indirect result of the Financial Services Authority’s consultation paper, the company’s chairman and compliance officer have sent an open letter to the FSA asking them to withdraw its statement which referred to Traded Life Policy Investments, or TLPIs, as ‘toxic’.
The letter states that while it’s certainly true that TLPIs aren’t appropriate for all retail investors, clarification should be given by the FSA as to which funds within the sector are viewed by the regulator to be ‘Ponzi’ schemes, or in other words, fraudulent investment operations.
The possibility of ban of the sale of these types of investment plans has arose due to FSA concerns about the design, marketing and sale of these products, and the impact on retail investors in the United Kingdom. Among the concerns raised by EEA Fund Management, they pointed out that for TLPIs are entirely suitable, providing clients have received professional advice from a suitability qualified authorised financial planning or an investment company. Their concerns centre on the fact that other products may carry similar risks but haven’t been singled out in the same way or labelled ‘toxic’.
Recommendations for Stable TLPIs
The letter has outlined some recommendations in order to ensure stability of the products, including the disallowance of investment into a TLPI when investment is below a stated minimum threshold, an agreement for investors to declare that any TLPI investments are not over an agreed and allowed percentage of their overall portfolio, along with limitations on fees payable for TLPI sales, in order to provide consistency between this type of product and other alternatives.
Financial Planning Advice You Can Always Trust
Here at Guardian Wealth Management, we appreciate that the FSA has the protection of client’s to consider, but also believe the consultation paper needs to be completed and as a result clear guidelines for both fund managers and the investors is forthcoming.
If you’d like to talk to a professional financial advisor regarding your investment portfolio, or any other financial planning matter at all, please don’t hesitate to contact us – alternatively, feel free to look through our website for details regarding a whole host of financial planning products and services.