The UK Financial Services Authority (FSA) this morning announced that it is pushing ahead with plans to consult on banning the marketing of traded life settlement products to retail clients.
The regulator published its final guidance on traded life policy investments (TLPIs) earlier today, following a previous guidance consultation in November.
The guidance states:
We strongly recommend that TLPIs should not reach the vast majority of retail clients. This is not the first time we have warned the industry about these products.
This year, as part of a review of the rules relating to unregulated collective investment schemes, we intend to consult on a ban of all marketing – including marketing delivered in the context of financial advice – of TLPIs to the vast majority of retail clients.
The FSA says the final guidance is an interim measure ahead of a consultation on new rules which will look to impose “significant restrictions” on the promotion of non-mainstream investments, including traded life settlements, to retail investors.
TLPIs invest in life insurance policies, typically of US citizens. The investor purchases the right to the insurance payouts upon the death of the original policyholder. As a TLPI investor you are effectively betting on when a particular set of US citizens will die and, if these people live longer than forecasted, the investment may not function as expected.
This is news if of particular relevance to investors with companies like EEA Life Settlements who had to suspend their fund as a result of the first FSA announcement in November. If you are a EEA Life Settlements investor, you should contact your financial adviser immediately to discuss the implications of this latest development.