FSA ties up £194m deal for split-cap investors

Eighteen City firms have agreed to pay £194m into a fund to compensate investors who lost money in the split-capital trust scandal.

In a deal that has taken the Financial Services Authority most of the year to broker, up to 40,000 investors may receive up to 80 per cent of the money they lost when the highly geared trusts collapsed as a result of falling stock markets between 2001 and 2003.

The FSA has agreed to take no further action against the firms that joined the settlement, or the individuals who worked for them. However, some of the architects of the scandal have accepted bans that in effect mean they will never work in the City again.

Christopher Fishwick, a director of Aberdeen Asset Management, which was the biggest backer of split-capital trusts, has agreed not to work in the City for seven years.

David Thomas, who worked for Brewin Dolphin, stockbrokers to many of the trusts, has agreed to retire from the market.

Aberdeen was the largest contributor to the fund, paying out some £78.3m before legal costs. Brewin Dolphin is paying £5m, while Collins Stewart Tullett, another broker, which is said to have held up the final settlement while it argued about legal issues, is paying £10m.

Four firms - Exeter Fund Managers, BFS Investments, BC Asset Management and Teather & Greenwood - refused to join the deal. They face being taken to the Financial Ombudsman by investors seeking compensation.

It is understood that some of the four pleaded poverty, saying they could not afford to pay the amount demanded under the proposed settlement. This raises the prospect of them being forced out of business by the claims made against them. In that case, any compensation would have to be paid through the Financial Services Compensation Scheme, which gets its money from a levy on City firms.

In addition, eight individuals refused to sign up and they will now face disciplinary action from the FSA.

One participant said: "This reflects well on [FSA chief executive] John Tiner. It shows he can be pragmatic when he needs to be."