Aberdeen Appeals Against Split Cap Ruling

by Jason Gorringe, for LawAndTax-News.com, London

03 April 2003

It emerged this week that Aberdeen Asset Management is appealing a ruling by the UK's Financial Ombudsman Service (FOS) that shares in its Aberdeen Progressive Growth unit trust were mis-sold to the public using misleading marketing materials.

Aberdeen Progressive Growth was one of a number of vehicles which invested in the risky split cap sector, and according to a report released in January of this year, had at that point fallen 70% since its inception in 2000, costing many hundreds of investors their life savings.

Ruling late last year on a handful of test cases dealing with split caps, the FOS announced that Aberdeen's marketing of its Progressive Growth fund as 'the one year old that lets you sleep at night' had been misleading with regard to the amount of risk involved.

However, reports in the UK media have revealed that the company is appealing this preliminary ruling, and is in talks with the ombudsman to get it reversed. This turn of events is, at the very least, likely to substantially delay any settlement for investors.

The UK's Financial Services Authority (FSA) was warned last year over the 'potentially incestuous nature' of the split capital investment sector by the Guernsey Financial Services Commission. However, whilst the latter regulator stepped up its risk warnings to investors regarding the vehicles, the FSA's warning, when it came, failed to prevent some 50,000 investors from losing more than £770 million when several prominent split cap trusts collapsed.

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