FSA clampdown on split trust cross holdings

The Financial Services Authority is considering changing the City's Listing Rules in an attempt to force split capital investment trusts to disclose far more of their shareholdings.

Under the FSA's proposals, the trusts may be required to disclose any holdings which they own in other trusts which make up 0.5 per cent or more of their gross assets. At the moment the trusts and all other listed companies have to disclose only holdings of 5 per cent or more. Many split cap trusts own cross-holdings in each other. The practice has been heavily criticised in recent months because it can make them risky. If one trust goes under, the effect can ripple out to those which own stakes in it.

The FSA, which issued a discussion paper on split caps yesterday, said it wants to examine whether there is enough regulatory disclosure in the split caps industry. It has invited comments on the proposal by 15 February.

Split caps are a type of investment trust which offer shares for investors who want either growth or income. They have caused alarm because a number have breached banking covenants due to negative stockmarket returns.

The Association of Investment Trust Companies has already asked split caps to voluntarily disclose cross holdings over 0.5 per cent. It has said that more than a third have already agreed.