Association of Investment Trust Companies director general Daniel Godfrey says he supports the propo...
Association of Investment Trust Companies director general Daniel Godfrey says he supports the proposals put forward by FSA chairman Howard Davies yesterday that would significantly change the rules governing the management of investment trusts.
The new rules would force investment trust companies to become more transparent on issues of gearing, investment policy and corporate governance, and would prohibit the sort of cross holdings that caused split capital trusts to come apart when the stock market turned south.
The relationship between managers and the boards of investment companies would also be tightened up, giving shareholders more say in proposed changes to investment strategy and restricting the level of severance pay for managers or directors.
Godfrey says that the proposals as they stand contain no surprises and reflect the discussions that the AITC has already had with the regulator in terms of reforming the investment trust sector.
However, Godfrey also warns that it is not a done deal, and that it remains to be seen how, if at all, the proposals are changed after consultation with various parties in the financial services industry.
"The devil is in the detail and whatever happens it needs to be made workable. We will of course be consulting with our membership on the issue."
Godfrey will not be drawn on whether the new rules could be seen as admission of guilt by the FSA over its handling of the splits crisis or whether it could be used by those seeking compensation for losses.
"Compensation is a different issue. These proposals look forward not back," he says, adding that compensation is a matter for the regulator.
The FSA wants to wrap up consultations on the new investment company rules by Christmas, according to a spokesman.
He says this does not mean the regulator is putting other reviews, consultation papers or discussion papers on the back-burner.
FSA chairman Howard Davies was lashed by the Treasury Select Committee yesterday over the way his organisation has handled the split capital investment trust scandal.
MPs have accused Davies of allowing "pyramid sales" of splits and even accused Davies and managing director John Tiner of engaging in a cover-up, saying a letter from the Guernsey financial services regulator warned the FSA about the risks of splits almost 18 months ago.
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From 6 April 2019