Alexander to broker deal on split cap compensation

The Financial Services Authority has lined up three legal experts, including Lord Alexander of Weedon, the former chairman of NatWest, to hammer out a compensation package with companies involved in the split capital investment trust débâcle.

The Financial Services Authority has lined up three legal experts, including Lord Alexander of Weedon, the former chairman of NatWest, to hammer out a compensation package with companies involved in the split capital investment trust débâcle.

The other two are Anthony Willis, who was a partner at the City law firm Clifford Chance for 25 years and is an expert in mediation, and David Ashton, a director of the Law and Economics Group, who has worked for many years investigating professional negligence.

The FSA wants 21 companies involved in the split-capital sector to pay compensation to investors who have lost thousands of pounds from the collapse of many of the trusts in the past two years.

It has set a deadline of today for the 21 to respond by letter to a meeting which it held two weeks ago. At the meeting it unveiled evidence of alleged collusion between a "magic circle" of fund managers which invested in each other's trusts in order to inflate their share prices artificially.

The regulator wants the group to agree to a "declaration of intent" to compensate customers. It also plans to impose financial penalties on those who have colluded and to name and shame them publicly.

However, it is thought that none of the companies that attended the meeting had as of last night agreed to the FSA plan, with some strongly resisting the watchdog's attempt to wring compensation out of them and denying that a magic circle existed. Others have indicated to the FSA that they are willing to pay compensation, but do not want to admit legal liability, on the grounds that to do so would make them vulnerable to being sued through the civil courts by customers even if they had also received compensation.

Some of the companies involved have also made it known that they are against the FSA's appointment of Lord Alexander on the basis that he was not chosen jointly by the regulator and by the industry.

However, the FSA indicated that it would press ahead with its team of mediators. A spokesman said: "We are not aware that any criticism has been made of Lord Alexander."

John Tiner, the chief executive of the FSA, told the meeting on 2 March that he would go ahead with the compensation plan if as few as five companies signed up to it. The regulator is expected to grant a short extension of its deadline for those who want a day or two longer to consider its legal implications.