The Definition of exotic products / UCIS / NMPI
Written on 02/07/2024

The borders of what is UCIS / NMPI and what is not are not easy. VCT and EIS schemes are sometimes NMPI, sometimes not. You need to study carefully the literature and look for independent opinions. The actual official list of NMPI products is held in the strangest of places  see handbook

In our experience the biggest tell tale is the source of the fund. Who is selling it to you?  Be careful of glossy alluring brochures such as the photo attached!   Remember Arch-Cru!   If you are unsure, get our opinion because no director can be held liable for seeking advice from a professional firm and then following that advice. 

Of all the scandals in retail financial services in recent years, the sale of unregulated collectives has been the daddy of them all. Hundreds of IFAs are now in other careers having sold these products. It all started in the share market falls of 2003, when property at the time looked risky and the world went in search of the next big thing. As if. It was a time of hedge funds shorting and big money in banking, so it was understandable that a tiny minority looked at what we at IFAC at the time first called Exotic Products. They soon became known as UCIS because they are unregulated collectives. Many forgot that the advice to invest in an unregulated fund is regulated, which makes it quasi regulated. Add to that complex rules about who was eligible and you have a misselling cocktail called NMPI. Legislation for these came out in 2012 and firms are still going to the wall for selling these. PI routinely excludes it. It is easy enough for us to say avoid this, but soon enough you will be asked to advise on an existing holding of NMPI so you need to be prepared.

If you are considering products like this there is one thing that you must do.  You must get advice and follow it.  What is and isnt UCIS is a very complex point - and who exactly is eligible to invest and how to advise on UCIS is even more complex.  You need an opinion and you need to stick with the guidance that comes from that opinion.

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