FSA Reaches Further Split Cap Settlements

by Robin Pilgrim, LawAndTax-News.com, London

18 April 2005

The UK's Financial Services Authority (FSA) announced last week that it has reached an agreement with the remaining two fund management firms involved in the 2002 split cap debacle.

The financial services regulator announced last December that the legal row over the £194 million compensation plan for investors stung by the collapse of the split capital investment trusts had been resolved, despite fears that the failure of two of the companies involved in the settlement to sign an agreement (designed to prevent the firms from suing one another to reclaim losses) would prevent it from going ahead.

According to a statement released by the FSA and the Jersey Financial Services Commission at the time: "A company, Fund Distribution Limited ("FDL"), has been set up to make distributions from the fund to eligible investors who invested in certain Zeros and in a number of specified unit trusts and other financial products that invested heavily in Zeros. Distributions will be focussed upon private investors and their small investment vehicles that held the specified financial products at any time between July 2000 and June 2002."

It continued:

"An eligible investor will only be entitled to receive a distribution if the amount assessed by FDL in relation to them is at least £250 across all of their specified financial products...FDL will publish further details in the first quarter of 2005, including the application deadline. Investors will then have to apply for a distribution from the fund by that deadline. The statement concluded by announcing that: "The current intention is that applicants who accept the offer will receive an initial distribution from FDL in the fourth quarter of 2005. If there are still monies available, subsequent distributions may be made with an intention to complete the distribution by the end of 2005."

The FSA announced on Thursday that an agreement has now been reached with brokerage Teather & Greenwood and fund manager Exeter Asset Management, with the firms agreeing to contribrute £300,000 and £1,000,000 to the settlement fund respectively.

However, the regulator went on to explain that they had agreed to the settlement "without any admissions" and that: "The FSA has made no determination of regulatory breaches or imposed any penalties."

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