The FSA has issued the strongest possible warning against selling US-traded life policy investments in this country – so-called death bonds.
The regulator says it will ban their sale to UK consumers.
‘Death bonds’, says the FSA, are high risk and toxic products.
They are known as ‘death bonds’ because investors are essentially betting on the life expectancy of US American citizens.
They put their money into a pooled investment or fund which buys up US life insurance policies at a reduced value from people who are seriously ill, in order to collect the full pay-out when they die.
But many insurance policy holders may have been given the wrong prognosis, or medical advances mean they will live longer.
If they do, then the investment for someone in the UK will not function as expected. As well as being financially dodgy, many view the investments as literally sick – very morally dubious.
Margaret Cole, FSA managing director, said: “Firms should not be selling these high-risk products to retail investors, and so our guidance reminds firms of the importance of assessing whether a product is suitable for a customer and whether promotional material makes risk warnings clear enough.
“Products such as TLPIs are not a simple problem for the FSA to address as many of them are based outside of the UK, and so are outside the FSA’s jurisdiction. There are also considerations under EU law that will affect what we can do.
“However, the FSA is engaging in discussions in Europe around the MiFID review, AIFM Directive and with other European supervisors to find a solution to give greater consumer protection against these products.
“For now, we want to make our message about these products clear – they are completely unsuitable for most UK retail investors.”
News Source: http://www.introducertoday.co.uk/
The regulator says it will ban their sale to UK consumers.
‘Death bonds’, says the FSA, are high risk and toxic products.
They are known as ‘death bonds’ because investors are essentially betting on the life expectancy of US American citizens.
They put their money into a pooled investment or fund which buys up US life insurance policies at a reduced value from people who are seriously ill, in order to collect the full pay-out when they die.
But many insurance policy holders may have been given the wrong prognosis, or medical advances mean they will live longer.
If they do, then the investment for someone in the UK will not function as expected. As well as being financially dodgy, many view the investments as literally sick – very morally dubious.
Margaret Cole, FSA managing director, said: “Firms should not be selling these high-risk products to retail investors, and so our guidance reminds firms of the importance of assessing whether a product is suitable for a customer and whether promotional material makes risk warnings clear enough.
“Products such as TLPIs are not a simple problem for the FSA to address as many of them are based outside of the UK, and so are outside the FSA’s jurisdiction. There are also considerations under EU law that will affect what we can do.
“However, the FSA is engaging in discussions in Europe around the MiFID review, AIFM Directive and with other European supervisors to find a solution to give greater consumer protection against these products.
“For now, we want to make our message about these products clear – they are completely unsuitable for most UK retail investors.”
News Source: http://www.introducertoday.co.uk/
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