Decanter World Wine AwardsUK authorities to crack down on selling of wine investments
- Monday 3 September 2012
Risky wine investments: 'potential for customer detriment'
The FSA has published proposals to ban the promotion of Unregulated Collective Investment Schemes (UCIS) and similar products to the vast majority of retail investors in the UK.
It proposes that investments including traded life policy investments, fine wines, crops and timber should be sold only to the most sophisticated high-net-worth individuals.
Currently, UCIS can be promoted to ordinary retail investors; the FSA says it is clamping down because current rules allowing advisers to assess the 'suitability' of such risky products before selling them are not working.
Investments are being sold to people who are not aware of the risks and have no access to any compensation if they fail.
FSA spokesman Chris Hamilton told Decanter.com there were numerous examples of unsuitable wine investments being sold, and pointed to an investigation earlier this year which estimated fine wine investors had lost £100m over four years by entrusting their savings to failed wine companies.
These include Beaumont Vintners and Bordeaux UK, which collapsed this year owing creditors an estimated £1.5m and £10m respectively.
The FSA said it found ‘only one in every four advised sales of UCIS to retail customers were suitable, taking into account the customer’s needs and requirements. The FSA found that many promotions breach the restrictions and only a minority of advice is suitable.’
It said it is acting ‘because of the high levels of unsuitable advice it has uncovered and the potential for customer detriment.’
Hamilton stressed that private individuals should be free to make any investment they like without the advice of a financial advisor.
The proposals are under consultation until mid-November, when they will go to review. The new rules, which which financial advisors will have to adhere to, are expected in the first quarter of 2013.
Have your say!
Jim Budd
September 05 13:02
Speaking to Chris Hamilton he has confirmed that the proposals do not cover the selling of individual cases to individual investors. The proposals cover wine funds
Unfortunately as Jackson points out the major losses to investors have not been through collective investment schemes. None of the £100m quoted was lost through a wine fund.
These proposals will do nothing to alleviate the current pandemic of dubious wine investment companies touting wine investments to all and sundry, especially the old and vulnerable. There appears to be nothing to stop wine investment companies making outlandish claims on their websites or through their cold calls.
Jackson
September 04 16:03
Peter is right. This doesn't go to the heart of the problem.
The vast majority of investor losses in fine wine investment, as documented by Jim Budd, occurs not in UCIS schemes but in simple sale transactions by private firms to individuals.
What is needed is more regulation of that sector, even on a voluntary code of conduct basis, to give investors some assurances of who they are dealing with.
Peter Shakeshaft
September 04 10:55
Your article is somewhat misleading !
To clarify, the FSA have issued a consultion document with a view of only permitting 'high net worth' individuals to participate in UCIS funds and have not issued ANY direction on individual wine investment per se !
So to be clear it seems that there are NO PLANS for the FSA to regulate the selling of individual cases of fine wine to customers as an investment.
That said I and others are presently working on a document to 'self regulate' the Fine wine investment community !
Peter Shakeshaft Vin-X