Broadly speaking, a collective investment scheme (CIS) is a fund into which various people contribute (sometimes called a Pooled investment). The fund is then invested by a fund manager in one or more types of asset (such as stocks, bonds or property).

Many types of CIS are sold to UK investors. A regulated CIS is one that the Financial Services Authority (FSA) has either authorised (for a UK CIS) or recognised (if it’s a non-UK CIS). Non-UK CISs must be recognised by the FSA before they can be marketed to the public in the UK, and the FSA will only recognise them if they meet certain specified criteria.

If a CIS is not authorised or recognised by the FSA it is then classed as an ‘unregulated collective investment scheme’. Unregulated CISs may be established, operated and/or managed in a jurisdiction outside the UK or the EU.

You can check whether a CIS is authorised or recognised by the FSA by clicking on the CIS Search tab of the FSA Register – see Check the FSA Register.

While an unregulated CIS itself is not a regulated investment, if promoted or sold by a firm in the UK, this counts as a regulated activity.

As with most investments, you could lose some or all of your money. However this risk is likely to be particularly relevant, as unregulated CISs frequently invest in assets that are not available to regulated CISs, and they may be structured differently to regulated CISs.

Unregulated CISs are not subject to investment and borrowing restrictions that regulated CISs are. As a result they are generally considered to be a high-risk investment, and you should always ensure that you understand the risks before investing.

If you invest in an unregulated CIS, you may not be covered by the Financial Ombudsman Service (Ombudsman) if you have a complaint about the fund or the way it was sold, or the Financial Services Compensation Scheme (FSCS) if this go wrong and you need to seek compensation.

Unregulated CISs can be complicated. Before you agree to invest in these schemes, take your time and consider the investment carefully.

If your adviser recommends a particular unregulated CIS to you, they must make sure that it is suitable for you, having established your knowledge and experience of unregulated CISs, your financial situation and your investment objectives. Unregulated CISs cannot be promoted to the general public, only to certain limited categories of investor (such as certified high-net-worth investors, sophisticated investors, self-certified sophisticated investors, and existing investors in unregulated CISs).

Make sure you:

Ask your adviser:

You should seek professional advice if you are in any doubt about the potential risk and returns involved.