Clifford Chance holds £195m split caps compensation

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The Independent Online

The 18 firms which have agreed to contribute to the Financial Services Authority's split-capital investment trust compensation fund have collectively handed over £195m to Clifford Chance, the City law firm which represents the regulator. The funds will be released to the FSA as soon as the deal is finalised this week.

The final settlement excludes BFS Investments, BC Asset Management and Exeter Asset Management, all of which will continue their negotiations with the FSA separately.

Exeter, which was bought by the Iimia Investment Group this year, was a last-minute exclusion from the settlement. Although it has set aside some £10m to cover liabilities from the split-cap debacle - a sum which was ring-fenced after Exeter sold its unit trust business to New Star Asset Management last year - it is believed to be reluctant to hand over any money to the FSA before it has seen off all potential litigation threats.

Aberdeen Asset Management - which will make the largest contribution to the compensation fund, of £75m - looks set to once again be forced to postpone its results today, due to the delay in finalising the details of the settlement.

Aberdeen was originally due to publish its results on 6 December, and has now already postponed them twice, in an attempt to ensure that the FSA's final announcement is released first.

While there is still a chance that a settlement will be sealed today, it is unlikely that Aberdeen will report before tomorrow. If a settlement is not published before the end of the week, it is believed that Aberdeen will go ahead and report anyway, becoming the first to officially disclose its donation to the compensation fund.

Even if a deal between the 18 is finalised this week, the negotiations between the firms outside the settlement are likely to drag on for many months.

BFS and BC claim to not have sufficient resources to make any substantial contribution to the compensation fund. However, the FSA remains keen to force the companies to contribute more. In the case of BFS, the FSA is believed to have wanted as much as £10m to £15m, although the company has offered only a small seven-figure sum. The FSA is also believed to want the company's founder, Tony Reid, to agree to not work in the City again.

If an agreement cannot be found, the regulator and the firms outside the settlement are likely to fight it out before the Financial Services & Markets Tribunal next year.