Compensation for split-caps 'will flow by July'

daniel godfrey, director general of the Association of Investment Trust Companies (AITC), has said that investors who suffered from the split-capital scandal should begin to receive compensation in July.

He was speaking after the Financial Services Authority (FSA) ruled out a wide-ranging inquiry into the affair this week, dashing hopes that such an exercise might trigger government compensation.

At the AITC annual conference in February, Mr Godfrey revealed plans to set up a £10m hardship fund for victims of split-cap investment trusts. Mr Godfrey's plan was criticised by trusts, who felt they should not contribute to such a fund when they were not involved in split-caps.

Split-capital trusts divide their shares into two classes. The holders of one class receive all the dividend income from the trusts' investments, while holders of the other class benefit from those investments' capital growth. They began in the 1980s, when there was a substantial difference between capital gains and income taxes. But many of these trusts have been brought down by high borrowings. They also compounded the problem by investing in one another.

In February, Mr Godfrey said: "I am looking to the trusts that have made money in the bull market to offer relief to those who have suffered. It's important that we are able to show that we are prepared to act to help those who may otherwise have to wait years for compensation through the normal legal process." He added that the money should be paid without any implication of fault or blame on the part of the trusts.

Mr Godfrey said this week that the trust deed for the AITC charitable foundation had been established and a bank account opened. He would not say how much money was in the account, but there have been pledges of £1m. The task of fundraising is about to begin, and should take about two months.

He added: "We have done a lot of research into the appropriate criteria for making payments, and there will be a fact sheet so that investors can see whether they might be eligible. I am trying to hire a case worker to deal with applications so that they can be presented to a review panel. I have eight volunteers for that panel, although I want to whittle that down to three.

"I hope to have the whole thing running and awards going out in July, but I cannot be sure. I am conscious that this is not just something that is nice to have ... for some it will be a godsend."