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AIA

FSA eyes venture capital promotions

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24th Nov 2005
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The Financial Services Authority (FSA) is threatening enforcement action against 11 companies over their web-based marketing of venture capital trusts (VCTs).

Research in the area has been ongoing since the FSA identified VCTs as an area of concern in March. The issues do not apply to sales through advisors.

Concerns include:
* Sites failing to mention that the investment must be held for the full three year period to qualify for tax relief
* Sites failing to say that the investment was in small, unquoted companies. Most sites did not clearly explain the risks associated with investing in such companies
* In some instances, the risks of VCTs was adequately described but was hidden in small print. One promotion played down the risks associated with investing in VCTs
* Sites failing to mention the long-term nature of the product, not adequately explaining the difficulties and restrictions involved in reselling VCTs, or failing to provide a prominent indication of likely charges.

Vernon Everitt, the FSA's director of retail themes, said: "All financial promotions must be clear, fair and not misleading and ' particularly with investments such as Venture Capital Trusts ' must be balanced.

"Most of the web-based promotions we reviewed did not explain all the main risks prominently. This needs to be fixed quickly and we are contacting a number of the firms to establish what action senior management will take to put things right."

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