Secret split cap summit
THE Financial Services Authority has called all 21 firms involved in the split capital investment trust debacle to talks on a potential settlement for millions of investors who lost fortunes.
But several firms are expected to refuse the invitation, with one top executive asking: 'Why should we go?'
The letter from John Tiner, FSA chief executive, suggests that the City regulator's investigation - the results of which are expected shortly - has failed to identify 'villains' and will not censure or fine firms or individuals.
The FSA launched its investigation in May 2002 into allegations of collusion and mis-selling in split capital trusts after about 40 of the 120 trusts ran into trouble, running up huge bank debts.
Split capital trusts were sold as low-risk investments to parents planning for school fees or older people wanting to boost their retirement income. Several trusts were in a 'magic circle' of funds that invested in each other, resulting in the collapse of some when stock markets plunged.
About 2m savers lost money, while those who invested in a type known as zero trusts lost £667m in two years.
Tiner has invited the firms' chairmen and chief executives to a meeting at the regulator's offices in London's Docklands on 2 March, where he plans to outline his proposed settlement.
Several firms are, however, expected not to attend. One senior executive said: 'It is a bizarre move. If Tiner has concluded his investigation and found evidence of wrongdoing, shouldn't he just punish us?'
He added: 'What is he going to say? 'You've all done something wrong, but we will ignore that if you pay up.î Or 'we haven't found evidence of wrongdoing, but just give us a load of moneyî. I can't think of an alternative.'
In his letter, Tiner asks that the potential settlement meeting and his invitation remains confidential.
His letter claims that the investigation is designed to restore confidence in the investment trust sector and to secure compensation for investors. He suggests that it is in the interests of all involved parties to speed up its resolution.
The FSA was criticised by the Treasury Select Committee, chaired by John McFall, for failing to be 'proactive' in spotting the danger signs in the split capital trust sector.
The committee asked the firms involved in the debacle to contribute to a compensation fund and said inadequate warnings were given about the risks of investing in ventures that 'amounted to little more than a sophisticated form of pyramid selling'.
