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Moneyforums
Veteran Investor
Joined: 18 Jun 2004
Posts: 598
Cash Points ££ 250.42
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 Posted: Thu Dec 30, 2004 5:09 am Post subject: FSA reveals Split Investment Trusts compensation |
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After months of legal wrangling the Financial Services Authority has finally unveiled the terms of the £194 million compensation package for investors hurt by the splits capital investment trust scandal.
A last-minute dispute between Collins Stewart and ABN Amro over whether firms involved in the settlement could sue each other has been resolved, although the FSA would not comment in detail.
A total of 23 fund managers, banks and brokers have agreed to put £143 million into a compensation fund which will aim to distribute money to holders of zero dividend preference shares (zeros) by the end of next year.
The companies’ contributions to the fund are not being disclosed and the firms are making no admission of liability.
Seperately, Aberdeen Unit Trust Managers has agreed to pay £43.3 million to investors in the Aberdeen Progressive unit trust which invested in zeros.
The sums of money are small in comparison with the losses incurred by investors. It has been estimated that zero shareholders lost £677 million of the £785 million they invested.
It will also disappoint investors whose expectations were raised earlier this year when the FSA sought £350 million compensation from firms involved in marketing zeros to the public.
Many fund managers and brokers sold zeros as low risk investments as the stockmarket started to fall after the dotcom boom. However, the sector fell into a savage downward spiral after 9/11 as split trusts’ heavy borrowing and cross-holdings in other split funds accentuated losses from the continued downturn in share prices.
The City watchdog has taken action against a number of leading figures in the investment trust sector. Chris Fishwick, the former head of closed end funds at Aberdeen, dubbed in some quarters as ‘Mr Split’ has agreed not to work in the City for seven years. David ‘Dotty’ Thomas, formerly a consultant with Brewin Dolphin, a broker that sponsored many of the split capital investment trusts, has agreed never to apply for approval from the FSA again. This means the 71-year-old will also never work in the City again.
The FSA has also issued private warnings to other individuals who have agreed to a number of ‘remedial measures’ such as retraining, redeployment and increased supervision.
Four firms, who are not part of the settlement, and eight individuals face the threat of fines or banning orders from the FSA. The four firms are investment firms BFS, BC, Exeter Fund Managers and stockbroker Teather & Greenwood.
A company Fund Distribution Limited has been set up to handle compensation payments to private investors. FDL will publish details of how to apply for compensation in the first quarter of next year. Payments are expected to be made by the end of the fourth quarter.
For more information ring 0845 606 6389 or visit www.funddistribution.org |
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