This means financial advisers will now have to limit the promotion of high risk, exotic investments such as wine, to specific investors only.

If you’re concerned that you have investments in a UCIS, Rebecca Prestage, head of policy at The Consulting Consortium, outlines what you should do:

What are UCIS?

A collective investment scheme (CIS) is a fund that several people contribute to, sometimes referred to as pooled investment. A fund manager will invest the pooled money in one or more types of asset, such as stocks, bonds or property.

There are many types of CIS that are regulated by the FCA, but if a CIS is not authorised or recognised it is considered an unregulated collective investment scheme (UCIS).

Are they regulated at all?

UCIS are not subject to the same restrictions in terms of their investment powers and how they are run. However, even though a scheme is not authorised or recognised, activities in relation to UCIS, i.e. providing recommendations and advice or arranging/operating/managing the schemes, are still regulated.

Can anyone be recommended to invest in a UCIS?

There are strict guidelines that advisers must adhere to in order to recommend a UCIS. However, some of these guidelines have not been adhered to and people who shouldn’t have been recommended a UCIS, have been.

How do I know if I have a UCIS?

UCIS can be complex and opaque, with various corporate structures and parties involved in the management, consulting and promotion of a scheme. The legal complexities can be difficult to navigate and it is not always easy to identify the true legal structure, investment strategy and risks. Investors should therefore engage with their adviser and ask if they have any UCIS within their portfolio or if they have ever been exposed to them.

Should I have been recommended a UCIS?

There is strict criteria surrounding what type of individuals can be recommended a UCIS. Investors should ask whether or not they fall into one of the groups that can have a UCIS promoted to them -if an investor has already been sold a UCIS they should ask the firm which eligible investor group they fall into.

Certain investors will be categorised as ‘sophisticated’ (someone with extensive knowledge and experience of investing) or ‘high net worth’ (earning over £100,000 or having £250,000 to investable assets).

Investors, should ensure that they are comfortable that they have been correctly certified as falling into one of these categories.

Should I be concerned if I have a UCIS in my portfolio?

Investors should be concerned about what proportion of their portfolio is invested in UCIS, and what the underlying assets are. If the overall % invested in UCIS is very small, it may not be an issue.

Not all UCIS are bad, and some have performed very well – for the right investor. UCIS are often illiquid investments, which means that it can be difficult to realise funds, and they can also be difficult to value or to sell.

UCIS are, by their very nature, risky products and because they are not regulated, investors may not have access to any protection afforded by FOS or the FSCS.

What questions should investors they ask their adviser if they fear they have UCIS products in their portfolio?

Investors should ask advisers to explain, in detail, what investments they hold and how they are designed to meet their investment objectives.

Advisers should be able to explain the level and degree of risk associated with their investments and detail why the investment is suitable.

Investors should be wary and cautious of advisers who are not able to readily articulate (without jargon) the details/risk/impact that holding UCIS will have on their portfolio and overall investment objective.

Investors should also confirm with their adviser what charges there are, what the rate of return is and whether this is ‘actual’ or ‘targeted’.

What should do if I am not happy with my UCIS investment?

Investors not happy with the level of risk they are exposed to should ask what the implications would be of re arranging their portfolio to better reflect their requirements and the level of risk they are prepared to take.

If an investor believes that a firm has promoted or sold a UCIS that is not suitable or that the risks were not fully explained, they should make a complaint to the firm involved.

Investors should ask whether they have access to the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) if things have gone wrong, and seek independent professional advice if they are in any doubt about the potential risk and returns involved.

Who can I speak to if I am a DIY investor and have previously invested in UCIS products?

There are strict rules around how UCIS can be promoted/marketed so investors should contact their UCIS provider to ascertain if the promotion/marketing of the product was indeed meant for them and they should confirm that that they meet/met the eligibility criteria.

As above, investors who are concerned with a DIY UCIS product should seek the help of a professional adviser.

• Investors with Self Invested Personal Pensions (SIPPS) should also contact their advisers to enquire as to the content of their investment portfolios. The same advice above applies.

• Firms should have procedures in place to resolve matters relating to existing investments. They should be looking to address cases where unsuitable advice was given, and take remedial action where appropriate.

• The Financial Conduct Authority (FCA) is currently taking action against several firms and advisers involved in the sale of UCIS to the general public.

• There is a register on the FCA website to find out whether a CIS is authorised or recognised.