FSA summons split caps firms to discuss deal

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The Independent Online

The heads of 21 financial services companies caught up in the split capital investment trust debacle have been summoned for an extraordinary "fireside chat" with John Tiner, the chief executive of the Financial Services Authority.

The watchdog has been investigating allegations of mis-selling and other impropriety over the investment products, many of which collapsed as a result of the equities bear market.

The FSA is understood to want the industry to come up with plans to compensate victims and has set 2 March as a date for a meeting with Mr Tiner, which the companies involved have been warned to keep secret and from which their lawyers are excluded.

Some of the conclusions of the two-year investigation will be revealed at the meeting, but some of the fund managers, brokers and financial advisers summoned believe that the FSA may not have found enough to fine individual firms.

An insiders at one of the companies said: "There is a well set-out process for the investigation, which will report its findings, suggest disciplinary action and give firms the chance to debate and appeal the rulings. This fireside chat with Mr Tiner seems to be totally outside of that. It is very bizarre. It doesn't suggest that they have found anything very much."

Split caps were sold to investors as being very low-risk products, but a combination of falling equity markets and lower interest rates led several to collapse. Since many invested in shares of other split cap trusts - in a situation that has been described as a "magic circle" - problems spread rapidly across the sector.

Some estimates put the losses suffered by investors at £650m in total, and the FSA launched its investigation in May 2002 after 40 of the UK's 120 split caps ran into trouble.

Fund managers including Gartmore, Jupiter, Aberdeen Asset Management and Morley, brokers such as Brewin Dolphin, and independent financial advisers have been drawn into the investigation. Several fear that the FSA will ask them to agree to settle or face more prolonged investigation.

Mr Tiner says in his letter that the meeting is aimed at restoring confidence in the investment trust sector.