Unregulated Collective Investment Scheme Claims
Some complicated investment opportunities are being unlawfully promoted and sold to members of the general public. Investors need to be wary of these unregulated collective investment schemes (UCIS).
A collective investment scheme (CIS), which is sometimes referred to as a ‘pooled investment’, is a fund that several people contribute to. If a collective investment scheme is not authorised or recognised it is considered an unregulated collective investment scheme (UCIS).
Establishing, operating or winding up a CIS is a specified and regulated activity. Contravening the regulations and failing to seek authorisation is a crime. S26 of FSMA 2000 provides that any contract made in relation to such an activity is unenforceable and therefore void or should be voided.
A competent solicitor should have been or made themselves aware of the regulations.
Therefore, the solicitor should have checked under the FCA CIS checklist whether the scheme was UCIS or just CIS. If he failed to do so, or if having checked, found that the scheme was a UCIS and did not advise the client about its unenforceability and the recoverability of the payments then the solicitor was negligent.
A duty of care exists between a solicitor and his client. If a solicitor advises his client to enter into an investment which is into a UCIS the client has a statutory right to compensation and, if not satisfied elsewhere, the solicitor (or his Professional Indemnity Insurer) must meet the client’s compensation claim.
S26 also provides that all payments made by investors under an unregulated CIS are recoverable.