Investors in split-capital investment trusts should now be able to claim compensation. The BBC News website takes a closer look at split-caps and the £700m mis-selling scandal.
People found that their split-cap investments sank without trace
What are split-cap trusts?
Split-caps are a type of investment trust.
Investment trusts are listed companies which buy shares in other companies. Their success - and the return they provide to investors - largely hinges on the performance of the companies they invest in.
Investors in investment trusts get both income - from a dividend paid by the trust - and capital growth - through the rise in the price of the shares.
There are two types of split-cap investment trusts. Both types usually run for three, four or five years before winding up and - in theory - returning the money to investors.
The first type are income split-caps. People invest capital in the trust, collect dividends and then hope to get their capital returned at the end of the trust's life.
There is however no guarantee that they will get their capital back and their dividend payments could be hurt by the poor performance and low dividends of the companies the trust invests in.
The second type are capital split-caps. People invest capital in the trust but do not get dividends. Instead they get a share in the trust's capital growth at the end of its life.
They are gambling on the trust's share price, and they are at risk of losing heavily if it falls. If the trust collapses in value, they are last in line to retrieve any of their initial investment.
Who bought split-caps?
When split-caps started in the 1970s, they were usually sold to sophisticated private investors with lots of money.
However, during the rising stock market of the 1990s, split-caps started to be sold more widely as 'safe' investments.
The investments were often sold to ordinary people as an ideal way to save for school fees or retirement.
What went wrong with split-caps?
Some split-cap fund managers over-reached themselves.
With share prices rising, and interest rates low, some borrowed additional funds to invest in the stock market.
This increased returns in the good times, but left them facing much greater losses as the market fell.
As well as borrowing additional funds, some of the trusts invested in each other.
This led to allegations of a "magic circle" - that the cross-holdings may have been in the interests of the fund managers, but not in the interests of investors.
This complicated network of holdings amplified the damage caused by the fall in value of some trusts in 2000.
In fact, many shares in split-cap funds became worthless when they reached their wind-up date.
The collapse of split-capital trusts left many small investors facing financial ruin. In total, about 50,000 are believed to have lost an estimated £700m.
What has been done for these investors?
The Financial Services Authority (FSA) launched an investigation into split-caps in May 2002.
The FSA's investigation was enormous and involved 780 files of evidence detailing 27,000 taped conversations and more than 70 interviews.
The FSA presented their evidence to the firms and after months of negotiations 18 split-cap firms agreed to pay into a £144m compensation fund.
Since the announcement of the deal on Christmas Eve, two other firms, Teather and Greenwood and Exeter Asset Management have also paid into the fund.
Why is the compensation package set at £144m when investors are believed to have lost £700m?
The FSA has had to tread very carefully.
At the time of the scandal, the FSA did not regulate the investment trust industry. As a result, they had little power to force the firms involved in the scandal to offer compensation.
The FSA spent months trying to get firms to voluntarily offer compensation to investors. At one stage, the FSA were reported to be asking firms to contribute close to £400m.
But the firms either did not have the money to pay compensation or had been taken over by other fund management companies that were keen to keep costs to a minimum.
Eventually, though, the firms agreed to pay £144m into a compensation fund.
I have lost money through split-caps, how do I claim compensation?
The compensation fund will be managed by an independent company, Fund Distribution Limited (FDL).
The FDL is sending claim forms to investors who have lost out.
These investors have to get their skates on as the closing date for returned applications is 18 July. Compensation will be paid in the autumn.
Investors can find out more about the FDL on 0845 606 6389 or by clicking on the link on the right hand side of this page.