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The “investment mis-selling” controversy – what should footballers do next?

Tuesday, 29 December 2015 By Daniel Northall

This article examines the legal implications of the recent controversy1 concerning the mis-selling of investments2 to high net worth individuals, notably footballers.3 Specifically, it explores the nature of the problem, including the investments made, how they might come to be mis-sold, and the avenues available to a footballer who has sustained substantial losses through mis-sold investments. It will be particularly relevant to footballers and their professional advisors.



Financial mis-selling is not new; nor is it a problem restricted to the wealthy. But there are few sections of society where the scale of the problem is particularly acute as it appears amongst professional footballers.4 All of the investments reported as “mis-sold” stem from the use of unregulated collective investment schemes (UCIS).

A collective investment scheme, also known as a “pooled investment”, is a fund which several investors collectively contribute towards. A fund manager then uses the pooled money to invest in one or more classes of asset, such as stocks or property. Its legal definition can be found in s.235 of the Financial Services and Markets Act 20005 (FSMA).

A collective investment scheme may be regulated or unregulated. The rules on what amounts to a regulated collective investment scheme are technical but, in short, such a scheme is regulated if it is authorised or recognised by what is now the Financial Conduct Authority (FCA).

An unregulated scheme is simply one which does not fall within the defined categories of regulated scheme. This is normally because the scheme does not comply with the strict borrowing and investment criteria of regulated schemes. They are often characterised by an investment portfolio which is not diverse, with the pooled money being invested into a single asset, such as a foreign property. This is why they are seen as high risk. If the asset fails, so will everyone’s investment. More prudent investment would see a more diverse range of asset classes in the fund so that the performance of the fund did not depend on the performance of a single asset or asset class.

Despite being unregulated, UCIS are not unlawful in the UK, but restrictions apply on their promotion to the public consistent with the degree of risk that they carry. Section 238 of the FSMA introduced a general prohibition on the promotion of collective investment schemes by persons authorised to conduct financial services by the FCA. A number of exceptions to the general rule are then carved out through various statutory instruments. A number of the important exemptions are set out in the CIS Promotion Order.6 These include:

  • Certified high net-worth individuals (article 21). 
  • Sophisticated investors (article 23). 
  • Self-certified sophisticated investors (article 23A). 

The Section 238 prohibition on the promotion of UCIS does not apply to persons not authorised by the FCA, but the effect of Section 217 FSMA creates a similar result. An unauthorised person cannot promote a UCIS unless the promotion is approved by an authorised person or is exempt under the Financial Promotion Order.8 That order creates similar exemptions relating to certified high net-worth individuals, sophisticated investors and self-certified sophisticated investors.



Footballers are uniquely positioned in the accumulation of their wealth. If successful, they may be paid large sums of money in a relatively short period of time. However, that earning potential is time limited, with most footballers’ careers at the highest level lasting no more than 10-15 years. Consequently, many footballers seeking financial advice may:

  • have large amounts of disposable income;
  • be young and impressionable;
  • lack sophisticated investment knowledge;
  • understand the need to plan for the future for when their footballing career is over;
  • be surrounded by advisers who exert an influence on their decision making.

These factors combine to create a situation in which the pursuit of risky investment strategies is made more likely. The collective nature of UCIS would appeal to most footballers. If a team mate has already made an investment, why shouldn’t they? The “clubbing together” of money might also give rise to a false sense of security – an individual’s exposure would only be as great as the next person’s.

The influence of a footballer’s advisers is another important factor. The original Sunday Times story9 reported that the financial advisers accused of mis-selling made undisclosed payments to agents of the footballers making investments as “introducer fees”, casting doubt on whether the financial adviser and the footballer were genuinely operating at arm’s length.

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Written by

Daniel Northall

Daniel Northall

Daniel Northall is an employment, commercial and sports lawyer at Littleton Chambers. His work has included a range of sports related disputes, including the dismissal of a Championship manager, and multiple claims against a rugby club in the Aviva Premiership brought by a former player.
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