FSA nears deal over split-caps scandal

The Financial Services Authority (FSA) is believed to have received assurances from several individuals involved in the split-capital investment trust débâcle that they will not work in the City again. Others have agreed to take part in retraining courses as a way of atoning for their alleged wrongdoing.

The Financial Services Authority (FSA) is believed to have received assurances from several individuals involved in the split-capital investment trust débâcle that they will not work in the City again. Others have agreed to take part in retraining courses as a way of atoning for their alleged wrongdoing.

In the past few days the FSA has narrowly missed out on closing a settlement agreement with the 22 firms involved in the long-running case, leading Aberdeen Asset Management to postpone its full-year results for yet another week.

Aberdeen, which is set to make the largest contribution to a split-cap compensation fund of up to £60m, said that as a result of the advanced state of negotiations it would now release its results on 20 December. The delay marks the second postponement of its results, which were originally due to be released at the start of this week, in just five days.

The FSA had set a target of yesterday for closing the settlement deal, having finally come to agreements with the majority of the individuals involved in the sector. However, it is believed problems with a small handful of individuals, and final negotiations over the small print of the settlement terms, means details will not be announced before next week. The final sum paid collectively by the 22 firms and their insurers looks set to be about £210m - some £140m less than the £350m which the FSA had originally demanded.

The final deal has also seen the FSA back down over its plans to take formal disciplinary action against individuals involved in the sector. Formal proceedings would have required blame to be apportioned, which could in turn have opened up the former employers of the individuals to legal action from investors. Instead several individuals are understood to have agreed not to work in the City again or undergo retraining.

The 22 companies involved in the negotiations have collectively hired M Communications to represent them once the announcement is made. It is believed that confidentiality agreements will bar the firms from disclosing details of the settlement process.

The result will represent a victory for the firms, ensuring that none of them are formally charged with the FSA's allegations of collusion. For the FSA, however, the settlement will be the end of a battle that has seen it forced to climb down on almost all of its main demands to reach a conclusion. Once the deal is closed, the next step will be to decide how to allocate the compensation, which is insufficient to compensate all retail split-cap fund investors.