The Financial Services Authority has imposed prohibitions on Paul Banfield and Anthony Moss, former directors of Best Advice Financial Planning, a small independent firm which was dissolved on 20 July 2011. Moss was the firm’s compliance officer, Banfield was its investment advisor.

The FSA found that at least 22 customers were advised to invest in unregulated collective investment schemes but found no evidence that the firm either understood the regulatory requirements relating to the promotion of these investments or took reasonable care to ensure customers received suitable advice.

Although UCIS are not authorised schemes, people carrying on regulated activities in relation to them, such as giving a personal recommendation, are subject to FSA regulation.

“Last year we published the findings of a thematic review that looked at the sale of UCIS by small firms. In it we set out our concerns that firms lacked awareness of the regulatory requirements, lacked understanding of the market and the risks involved, and were promoting and recommending UCIS to customers who were not eligible for them. This case firmly fits in with those findings,” said Tom Spender, head of retail enforcement at the FSA.

“UCIS are rarely suitable for retail investors. Many are characterised by a high degree of volatility, illiquidity or both – and are therefore usually regarded as speculative investments. Even when they are recommended they are unsuitable for anything more than a small share of a portfolio.

“We want firms to read the details of this case, along with the findings of our review and other recent publications on UCIS, and learn from them. We’ve seen a proliferation of firms offering UCIS so it is absolutely vital they do their homework before recommending these schemes to investors.”