Following a recent meeting between the FSA and the BVCA, and as we are approaching the peak season for VCTs, Peter Linthwaite, BVCA Chief Executive, draws attention to the points made in the Briefing Note issued by the FSA on 23 March 2005.
Following a recent meeting between the FSA and the BVCA, and as we are approaching the peak season for VCTs, I though it might be useful to draw attention to the points made in the Briefing Note issued by the FSA on 23 March 2005.
The following issues were raised by the FSA.
1 - The FSA identified that the majority of marketing activity was directed at current or previous VCT holders and high net worth clients. However, in line with some concerns set out in the FSA Briefing Note, they found that firms were directing their marketing efforts at a wider consumer audience.
2 - More specifically the FSA found instances where the promotional material put undue emphasis on the benefits of VCTs without highlighting potential downsides. The FSA were concerned that VCTs create a balanced picture of both the tax benefits and the potential risks involved.
3 - The FSA were also concerned that when referring to past performance of a VCT fund, manager or the VCT itself that it does not unambiguously, and without reservation, state that past performance should not be seen as an indication of future performance.
4 - The FSA also identified instances where risk information was not given appropriate prominence.
5 - The FSA found instances where investment firms used promotional material that focused on the better performing investments within the VCT, rather than on the performance of the VCT overall. They were concerned that this creates a misleading impression of the returns investors have achieved by investing in a VCT.
For further information, the complete Briefing Note can be found on the FSA's website under
www.fsa.gov.uk/pages/Doing/Regulated/Promo/outcomes/vct/index.shtmlPlease click here for an interesting note prepared by Travers Smith entitled "VCT Dividend Reinvestment Schemes - A Need for Restructuring". The note focuses on changes in legislation following the implementation the EU Prospectus Directive adopted in the UK on 1 July 2005. I thought you might find it useful.
Peter Linthwaite
BVCA Chief Executive
