UK Treasury Launches Consultation On Regulation Of Investment Trust Companies

by Robin Pilgrim, LawAndTax-News.com, London

26 November 2004

The UK Treasury announced on Wednesday that it has launched a consultation on the regulation of investment trust companies in order to fulfil a Government undertaking to consider and consult fully on the subject following a recommendation by the Treasury Select Committee.

In its report into split capital investment trusts the Committee recommended that investment trust companies should be brought within the scope of investment product regulation by the Financial Services Authority (FSA). The consultation aims to stimulate discussion about whether there is a need for additional regulation and, if so, possible options for legislation.

Investment trust companies are pooled, risk-spreading investment vehicles constituted as limited liability listed public companies, and split capital investment trust companies (splits) are a sub-sector of the investment trust company industry which have attracted a great deal of attention in recent years following the high profile collapse of a closely inter-related group of split caps.

The UK's Financial Services Authority (FSA) was warned in 2002 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.

Responses to the consultation are invited until February 25.

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