FSA Holds Meeting With Split Capital Investment Trust Bosses

by Robin Pilgrim, LawAndTax-News.com, London

09 March 2004

Last week, the UK's Financial Services Authority (FSA) met with the chief executives of 21 split capital investment trusts currently under investigation as part of the regulator's probe into the sector.

Updating the firms on the progress of the investigation, which was sparked by the high profile collapse of several split capital investment trusts in 2002, FSA chief executive John Tiner suggested that the affected firms should give consideration to taking part in planned collective settlement negotiations.

The negotiations, according to Mr Tiner, intend to ensure that investors receive compensation from firms where appropriate, and that the necessary disciplinary action is taken.

The 21 split capital investment trusts have been given until March 16 to decide whether or not to join the settlement process.

However, industry observers have suggested that negotiating compensation for investors affected by the 2002 collapses is likely to become a logistical nightmare.

Speaking to the FT Adviser news service this week, Stephen Alexander, senior partner at Class Law explained that:

“I do not understand how this is going to be implemented from a legal standpoint. The money involved is huge – our firm alone is seeking compensation of nearly £60m on behalf of 700 individuals. Can these firms just dip hands in their pockets and pay out? Unlikely. Will the insurers demand clinching evidence before paying? Of course.”

He continued:

“Compensation for split investors cannot be likened to that of Equitable Life policyholders where an equal amount can be paid to all. It beats me completely why the FSA is proposing collective negotiations and payment of compensation when culpability is not the same.”

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