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14 November 2012

AFME submission to FSA on restrictions on the retail distribution of UCIS and close substitutes

AFME says that improving the health of the securitisation market and encouraging more retail investors to increase their participation in it will be crucial to the financial stability and funding capabilities of the banking sector in providing much-needed finance to the real economy.

AFME understands the intention in the CP and has no objection in principle to the proposals of the FSA to restrict the marketing and promotion of certain types of UCIS and close substitutes to ordinary retail investors because of concerns by the FSA that such marketing fails to comply with relevant regulation and exposes ordinary retail investors to detriment.

AFME is however particularly concerned that the proposed definition of “Non-mainstream Pooled Investment” in the draft rules includes most securities issued by special purpose vehicles under mainstream securitisation structures and proposes to restrict those from being marketed to ordinary retail investors.

AFME has no objection in principle to the proposals in the consultation paper (CP) if they are limited to restricting ordinary retail investors investing in UCIS and close substitutes which are backed by or linked to risky or speculative assets specifically identified by the FSA.

However, the current proposals in the CP are far too wide, catching all mainstream securitised investments where AFME expects that this was not intended. AFME would have expected that most mainstream securitised investments should be able to be sold to ordinary retail investors if the providers comply with all necessary marketing and promotional regulations.

Full letter


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