Adviser guide - IFISA

15 KEY RULES 14 KEY RULES Key Rules Advice An amendment to Article 53 of the Regulated Activities Order (RAO) means that all firms have permission to advise on IFISA eligible investments. For DBS, an adviser within the firm will also need to hold a relevant qualification if they want to recommend individual bonds to clients. Alternatively, you can recommend the IFISA and then let the investors choose their own bonds. Limits IFISAs are subject to the same annual limits as other ISAs: for 2017/18 and 2018/19 that’s £20,000 split across the three main types of ISA (Cash, Stocks and Shares and Innovative Finance ISAs) in any way the investor chooses. Underlying Investments and Consumer Protections Consequently, IFISA eligible investments must be scrutinised by an FCA-authorised platform. Furthermore, for DBS investments only, the FSCS Investment Protection Scheme is available up to £50,000 of compensation where the platform cannot honour legally enforceable obligations against it. This may be a relevant consideration for advisers who prefer there to be FSCS investment cover. It is also a strong incentive for platforms to provide accurate and transparent investment information to avoid any potential liability for misleading offer documents. For more information on IFISA rules go to: https://www.gov.uk/government/uploads/system/ uploads/attachment_data/file/603261/ISA_ Lifetime_ISA.pdf For a list of authorised IFISA managers, go to: https://www.gov.uk/government/publications/ list-of-authorised-isa-managers/isas-authorised- managers The deadlines for investing and the rules governing unused allowances are exactly the same for IFISAs as for Cash and Stocks and Shares ISAs (invest by 5 April or the individual allowance for that tax-year is lost). As with Cash and Stocks and Shares ISAs, investors can only open one IFISA a year, even if they do not use the full investment allowance. However, where flexible ISAs are offered, withdrawals from the ISA (in the form of cash, which can include investment income or the proceeds from a disposal of shares) can be reinvested. Investors are only allowed to open one IFISA per year, but if the IFISA manager is an aggregator platforms which curates a list of P2P or DBS platforms and allows investment into their products through its own single portal, investors may diversify their IFISA investments across those platforms. As with stocks and shares ISAs, money must be deposited within the relevant financial year, but can then be invested at your client’s convenience and as and where there are suitable loans or bonds on offer. Transfers Transferring funds from an existing cash or stocks and shares ISA to an IFISA is allowed. However, caution should be exercised if transferring from a stocks and share ISA as in-specie transfers are not accepted and therefore it means liquidating investments, raising the issue of market timing. Transfers from a Stocks and Shares ISA can take a number of weeks depending on the platform, whereas transfers from cash ISAs tend to be much quicker, often within a week. Investors must first open the new IFISA and then request a transfer of funds and pick DBS or loans. Conditions to be IFISA eligible � Facilitated by a fully authorised platform � Entered into on genuinely commercial terms � Available for purchase by more than one prospective purchaser if loans held outside of the ISA wrapper are sold, and repurchased inside an IFISA P2P loans eligible to be held within an IFISA must be: The platform must also: � Treat the IFISA investor as its ‘client’. This arrangement offers the investor FCA regulatory protections and recourse to the Financial Ombudsman. � Be transferable � Be entered into on genuinely commercial terms � Be facilitated by a person with FCA permissions to arrange deals in investments � Receive payments, make payments and exercise (or facilitate the exercise of) rights under or in respect of the DBS DBS eligible to be held within an IFISA must: