Newspaper article The Evening Standard (London, England)

FSA Set to Unveil [Pounds Sterling]196m Fund for Split-Cap Victims; CITY BRIEFING

Newspaper article The Evening Standard (London, England)

FSA Set to Unveil [Pounds Sterling]196m Fund for Split-Cap Victims; CITY BRIEFING

Article excerpt

Byline: JIM ARMITAGE

THE Financial Services Authority is on the verge of wresting [pounds sterling]196 million from City firms to compensate thousands of people who lost money in the split-capital investment trusts scandal.

It follows months of wrangling with companies desperate to avoid liability for fear of being pursued further by investors. But, in what is the first time the FSA has taken on a whole industry, the outcome will be seen as a qualified success as the settlement is below the regulator's target of [pounds sterling]350 million.

About 20,000 investors are estimated to have lost [pounds sterling]600 million when the trusts collapsed. The long drawn-out process stalled time and again as companies battled hard to avoid stumping up compensation.

Now, after some last-minute wrangling over logistics, the deal may be unveiled today. The FSA is said to be waiting for one signature on the settlement, which involves some 18 firms, a new body administering the fund, the establishment of some 21 websites, a customer helpline and a 10-point question-and-answer document for consumers.

Splits were sold from the late 1990s as safe investments with little risk of heavy losses. But they collapsed in value after the stock market dived in 2000. It emerged splits had been investing in each other, creating a "magic circle".

When one went down, they all did.

Aberdeen last week postponed its results, saying an FSA settlement was imminent and speculation has been rife the parties will fall into line before Christmas.

Earlier this week, Exeter Fund Management's owner Iimia said it could not contribute due to inadequate funds. Several brokers and asset management firms are in similar situations. Exeter's departure followed that of BFS and BC, two asset managers at the forefront of selling splits.

FSA chairman John Tiner is likely to feel relieved. …

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