This proposed guidance relates to the following rules in the FSA Handbook
- Principles for Businesses 6, 7, 8
- COBS 4.2.1R(1), 4.5.2R and 4.5.4G
- COBS 9.2.1R
This guidance is likely to be of most relevance to
Firms that advise on TLPIs. Investment managers whose investments include exposure to TLPIs. Firms approving financial promotions for TLPIs.
Background to this consultation
TLPIs invest in life insurance policies of US citizens. They are sometimes also known as Traded Life Settlements or Senior Life Settlements.
There are serious problems with how TLPIs are designed, marketed and sold to investors. We do not think they are suitable products for retail customers and customer experience to date has often been poor.
In February 2010 we raised our concerns with the industry. We also highlighted our concerns in the 2011 Retail Conduct Risk Outlook and the Product Intervention Discussion Paper in January 2011.
The market still shows signs of growth. We fear new investors will suffer unless we step in. We intend to consult on a ban of all marketing – including marketing delivered in the context of financial advice – of TLPIs to mass market retail investors. As the process for introducing new rules via consultation takes time, we are issuing this guidance as an interim measure.
Summary of the key issues
TLPIs should not reach retail investors in the UK.
- Their product structures are complex and opaque.
- They carry high levels of risk and investors may find it difficult to sell their investment, or may lose money when they try.
- Many TLPIs are based offshore. This means that if something goes wrong and customers lose money, they may have limited or no recourse to the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS).
These products are complex and high risk, and generally speaking are unlikely to be suitable for retail investors. They should not be promoted to retail customers.
Full text of the guidance we are consulting on [pdf]
Cost benefit analysis
CBA is included in this consultation [pdf]
We invite your views on
We welcome your comments on the contents of the proposed guidance. This includes any comments on our CBA.
Please respond by
23 January 2012 (8 weeks)
It is the FSA’s policy to make all responses to formal consultation available for public inspection unless the respondent requests otherwise. A standard confidentiality statement in an email message will not be regarded as a request for non-disclosure.
A confidential response may be requested from us under the Freedom of Information Act 2000. We may consult you if we receive such a request. Any decision we make not to disclose the response is reviewable by the Information Commissioner and the Information Tribunal.
Please send your responses by email to
TLPI@fsa.gov.uk
Alternatively, please send your responses by post or telephone us
Jason Pope
Retail Investments Policy
The Financial Services Authority
25 The North Colonnade
London E14 5HS
Telephone: 0207 066 2074
