FSA announces tighter control on selling of fine wine investments

The UK’s Financial Services Authority (FSA) has announced stricter regulation on the selling of investments such as fine wine to clients with limited knowledge and money.

Following a spate of wine investment funds that have gone bust owing investors millions of pounds out of pocket, the FSA has stated that as of next year, advisers can only target clients with the necessary capital and knowledge.

Fine wine, classic cars, timber, crops, carbon credit rating trading and overseas property are all investables which will all fall under the new rules.

This means that only those with an annual income of more than £100,000, assets of £250,000 or more or “extensive investment experience and knowledge” should be approached.

Currently the rules allow advisers to merely asses the “suitability” of these products before selling them to clients and the FSA predicts that only one in four sales of what are termed Unregulated Collective Investment Schemes (UCIS) are carried out properly.

This means that too many people are being exposed to a, “significant potential for large losses on what are often esoteric and illiquid investments”.

Gavin Stewart, the FSA’s acting director of policy, risk and research, stated: “This situation needs to change and so we are acting now to prevent these products being marketed to ordinary retail investors in the future.”

It is thought that the UCIS market is worth around £2.5 billion and involves some 85,000 investors across various fields.

The FSA did add that not all investors under the current rules did end up losing out but it was time to stop examples such as Beaumont Vintners and Bordeaux UK, which went down this year leaving creditors out of pocket by £1.5m and £10m respectively.

It is thought that fine wine investments alone have cost clients over £100m in four years.

The proposals will be discussed until November and are expected to be implemented in the first few months of 2013.