Setback for splits investors

By Louise Greenwood
BBC Radio 4's Money Box

Investors lost thousands as share prices fell

Thousands of people seeking compensation after buying split capital investment trusts have suffered a setback after the Financial Services Authority (FSA) had to abandon a crucial meeting with the 21 firms who sold them.

It has raised fears that the regulator's two year investigation into splits could be scrapped.

Last month John Tiner, the Chief Executive of the FSA, told the 21 funds involved that they had a fortnight to set up a voluntary compensation scheme for investors. But that deadline passed with no progress.

One would hope that within six months or so there would be some conclusion Daniel Godfrey, AITC

On Monday, John Tiner called the firms to another meeting, but in what looks like a snub to the regulator, only three actually turned up.

Recent figures suggest investors lost over £600 million in the complex products which were sold as low risk.

The FSA insists the investigation is definitely still on but the split cap firms want clarification on certain points before they will meet.

Mediation process

Daniel Godfrey, Director General of the Association of Investment Trust Companies (AITC), said he hopes the talks will begin again soon:

"I think the negotiations are likely to go ahead, although of course there is no certainty.

I will be very surprised if people are compensated and if the wrongdoers are fined Alan Steel, IFA

"If the mediation process does go ahead one would hope that within six months or so there would be some conclusion... and that investors would receive some compensation."

But others are not so optimistic. Alan Steel of IFAs Alan Steel Asset Management said that the firms are defying the FSA which is powerless to make them act:

"I will be very surprised if people are compensated and if the wrongdoers are fined."

And he continued: "The fact they (the FSA) have spent two years at it and they are still saying the investigation is still on does not fill me with great hope."

However the FSA says it hopes the meeting can be rescheduled in a matter of weeks not months.

BBC Radio 4's Money Box was broadcast on Saturday, 10 April, 2004, at 1204 GMT.

The programme was repeated on Sunday, 11 April, at 2102 GMT.