The adviser explained the returns. Did anyone properly explain the risks?
What a proper risk explanation actually looks like
Explaining the risks of an investment recommendation is not the same as noting that markets can go up as well as down. That observation applies equally to every investment ever sold and tells the investor nothing about the specific characteristics of the product being recommended. For a UCIS investment, it is so inadequate as a risk disclosure that it barely registers as one at all.
A proper risk explanation for a UCIS product requires telling the investor, in terms they can actually understand and act upon, that the scheme is unregulated and sits outside the framework that governs mainstream investment products. It requires explaining that the Financial Services Compensation Scheme provides no protection if the scheme fails. It requires describing the illiquidity of the underlying assets and what that means for the investor's ability to access their money. It requires being direct about the possibility, in some cases the significant probability, of losing the entire capital invested.
What investors were actually told
Most UCIS investors received something that fell substantially short of that standard. Returns were explained in concrete and optimistic terms, with projections and historical figures that made the investment sound reliable and well-proven. The underlying assets were described in ways that emphasised their tangibility and their income-generating potential. Risk, where it was mentioned at all, was acknowledged in general terms that could apply to any investment, not in the specific terms that would have brought home to the investor what they were actually taking on.
Some investors were never told clearly that what they were buying was fundamentally different from the regulated products they may have held before. The distinction between a product covered by the FSCS and one that is not is one of the most important things an investor could know. It was routinely withheld or mentioned so briefly that it did not register.
The specific regulatory requirements
The FCA's rules on disclosure in the context of UCIS products are not aspirational guidelines. They set out specific obligations that advisers are required to meet. An adviser recommending a UCIS to a retail investor must provide a written risk warning in a specified form. That warning must be given before the client makes any commitment. It must make clear that the product is outside the FCA's regulatory framework and that FSCS protection does not apply.
The obligation to disclose the risks properly sits entirely with the adviser. The investor is entitled to rely on the advice they receive.
Advisers who did not provide that warning, or who provided it in a form so embedded in lengthy documentation that it had no practical effect on the investor's understanding, were in breach of specific regulatory requirements as well as their general duty to act in the client's best interests. Both failures give rise to potential claims.
Building the case
Establishing what an adviser said, and what they failed to say, at the point of recommendation often relies on the documentary record rather than competing recollections. The suitability report, the client fact-find, the risk disclosure forms, the application documents, and the correspondence around the time of the investment can all tell a story about what the client was and was not told. Specialist solicitors know how to work with that record and how to make a compelling case even where the adviser's account of events differs from the investor's.
Taking the first step
For UCIS investors who believe they were not properly advised about the risks of their investment, the starting point is a free assessment of what happened. That assessment looks at the advice given, the documentation produced at the time of the investment, the suitability of the recommendation given the investor's circumstances, and the routes to compensation that remain available.
The assessment through Sold Short is independent, thorough, and costs nothing. If it reveals a basis for a claim, the matter proceeds through specialist solicitors on a no win no fee basis. The investor does not take on financial risk. They simply pursue the compensation they should have received before the investment was ever recommended to them.
Sold Short helps UCIS investors who were not properly advised about the risks of their investment. Free assessment. No win no fee. Find out if you have a claim.