The tribunal hearing a crucial case concerning the multi-billion- pound collapse of split capital investment trusts was given misleading information about a key player in the scandal.
The Financial Services and Markets Tribunal made its preliminary ruling last month on whether David Thomas, a broker who advised many of the trusts, was a "fit and proper" person to work in financial services.
The tribunal agreed with the Financial Services Authority, the City regulator, that Mr Thomas should be refused an interim licence to work. The final ruling is due before Christmas.
However, part of the initial ruling was based on the information, which wasn't challenged by either the FSA or Mr Thomas, that he only sold splits to institutional investors. As a result, the tribunal ruling said: "While working for Brewin [Dolphin Securities, a stockbroker] ... he dealt with various investment corporations and managers but not with members of the public nor with [his employer's] individual clients."
Investment firms are assumed to be sophisticated institutions aware of the risks involved in the trusts that Mr Thomas helped design and promote as head of the investment trust department at Brewin Dolphin.
But a number of retail investors in splits met with, spoke to, or received documents written by, Mr Thomas, known in the City as "Dotty". John Vickers - whose family invested in St David's, a split run by Aberdeen Asset Management that used Mr Thomas as its corporate broker - said Mr Thomas had come up and introduced himself as an expert after he queried the health of his invest- ment at a shareholder meeting.
Mr Vickers's notes of the meeting in 2001 record Mr Thomas saying: "Don't worry about the zeros [the share class of St David's he had invested in], old boy. They'll be absolutely fine."
Another splits investor, Kenneth Weir, said his broker at Brewin Dolphin sent him supporting information written by Mr Thomas to reassure him about his investment. It said: "We strongly favour purchases of certain income shares [of splits] because they offer excellent returns today in the form of dividends, which are not seriously in danger." Most of the recommended buys, such as St David's and Aberdeen Preferred Income, subsequently collapsed.
A third investor, who wanted to be identified only as John, said he contacted Mr Thomas by phone after reading negative press coverage of one of his investments. John said Mr Thomas sent him information about a controversial reconstruction of a trust. John said the information was meant as a sales pitch for the new share class.
Mr Thomas was unavailable for comment at his home but his wife said he only dealt with institutions, not private clients. But Brewin Dolphin said: "David Thomas was a consultant dealing with institutional clients. On rare occasions he may have received calls or enquiries from private investors and provided information as requested. This is normal industry practice."
The FSA and the tribunal refused to comment.
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