FSA Concludes Split Cap Probe

by Robin Pilgrim, LawAndTax-News.com, London

22 May 2007

The UK's Financial Services Authority has been conducting an investigation into the activities of certain fund managers and brokers in the split capital investment trust sector between September 2000 and February 2002.

However, it announced on Monday that it has now resolved and discontinued its investigation in respect of the remaining firms and individuals under investigation.

According to the FSA, of these:

• David Bruce has agreed to resign as CEO of BC Asset Management Limited (BCAM) and to give up his existing controlled functions save for CF27 (investment management). Mr Bruce has also agreed not to perform any significant influence functions until 3 April 2009. The FSA has discontinued its investigation into BCAM.
• Roderick Crawford has agreed not to perform any customer functions until 31 December 2007 and not to perform any significant influence functions until 3 October 2009.
• Paul Glover has agreed not to perform any customer functions until 3 October 2007 and not to perform any significant influence functions until 3 October 2008.
• Anthony Reid, former CEO of BFS Investments Plc (BFS), has agreed not to perform any controlled functions until 3 October 2009. The FSA has discontinued its investigation into BFS which entered into a creditors voluntary liquidation in February 2006.

The financial services regulator has agreed that it will take no disciplinary action against the above firms and individuals. The FSA has not made any findings of regulatory breach against them and the above firms, and individuals have not made any admissions.

The split capital debacle began in earnest in 2002, when the 'potentially incestuous nature' of the trusts (as described at the time by GFSC official, Peter Moffat) took its toll, as the collapse of several of the so-called 'magic circle' created a domino effect amongst their counterparts.

Despite Mr Moffat's 2001 announcement that: 'we have been stepping up our required risk warnings as a consequence', the FSA conducted an investigation, but found no evidence of systemic risk at that time.

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