Wine Name:

Thursday, 6 September 2012

FSA proposals on wine investments etc. miss real target

In August the FSA (Financial Services Authority) issued a consultation paper how how Unregulated collective investment schemes (UCIS) are promoted and sold with a view to tightening up procedures and providing more protection to consumers by limiting their promotion to sophisticated and wealthy investors.

We have seen a significant increase in sales of UCIS to retail consumers and are aware of a number of risks in this market. We highlighted our concerns in our Retail Conduct Risk Outlooks in 2011 and 2012.
CP12/19 - Restrictions on the retail distribution of UCIS and close substitutes
We have published a consultation paper proposing rule changes aimed at improving retail consumer outcomes by limiting the promotion of UCIS and close substitutes, and ensuring that they are recognised as specialised products unsuitable for general promotion in the UK retail market. As providing financial advice generally includes making a financial promotion, by limiting the promotion of UCIS we aim to limit the number of retail clients being wrongly advised to invest in UCIS.
For full details of our proposals please read the consultation paper.'

Wine is mentioned in the consultation paper as one of the areas that have concerned the FSA: 'Our work has identified situations where members of the general public have been invited to invest in pooled investments based on the performance of unusual assets such as traded life policy investments (TLPIs), fine wines, crops and timber.' 

Unfortunately, although in a Decanter news story on the FSA proposals, Chris Hamilton is quoted: 'FSA spokesman Chris Hamilton told there were numerous examples of unsuitable wine investments being sold, and pointed to an investigation earlier this year which estimated fine wine investors had lost £100m over four years by entrusting their savings to failed wine companies' the FSA proposals miss what ought to be their target completely. 

The FSA proposals cover wine funds, which are collective investments.  I cannot remember the last time I had a complaint involving a wine fund. They do not cover the widespread miselling of individual cases to individual investors as investments. The £100 million loss quoted by Hamilton was suffered by investors buying individual cases as an 'investment'. Even though they are clearly promoted as investments, these transactions are outside the remit of the FSA. So anyone can set up a wine investment company and make all sorts of far fetched and outlandish claims about wine investment returns often based on out of date statistics and the FSA can say nothing

The only possible exception to this might be the selling of en primeur. which might be deemed as a 'collective investment' as an individual's wine cannot be identified until it has been bottled.

In the meantime more and more 'wine investment' companies disappear with investors' hard earned savings. Those investors are now likely to endure a long-term financial mugging.      


  1. Dear Jim

    UCIS as stated stands for unregulated collective investment schemes as pr determined by the FSNA 2000. This is where the investor does not have day to day control over the investment

    This does mean that those wine companies that hold client wines under an umbrella account running sub accounts will not be able to do so as it will be deemed a pooled investment

    This adds a minor level where companies have to deliver the wine to the clients own account and will stop the forex like trading of wines

    Its a start!!!!!

    1. Anon. A very interesting point and if this is how the FSA will interpret their remit and a UCIS this would certainly be a very good start. Will speak to FSA early next week.

  2. Yes Jim, to a point I agree with you.What worries me is this ridiculous self regulation idea that Peter Shakeshaft at Vin-x and others are shouting about. This "organisation" is an irrelevence, which seems to have been set up purely to publicise the companies involved without providing the investor with any safeguards. These companies will all still be cold calling, they will all be hassling people,they will still be doing the same old thing - the only difference is that they will all have a bogus accreditation which means nothing but which will probably fool the investor into thinking they're dealing with proper people. When the founder's - Peter Shakeshaft - dubious past is taken into account, how on earth can this man speak about any form of regulation let alone self regulation?

    1. Unfortunately it is impossible to know what the proposals are. Peter Shakeshaft said he would send me a copy of the proposals in late February/early March 2012. To date I have received nothing.

      I have already posted that any wine investment regulation has to be independent of any companies involved both in drawing it up and in its management. Given the history of Wills & Co I have strong doubts that it will be seen as credible and equally doubt that it will enjoy the confidence of either many in the fine wine trade or amongst potential investors.