The FSA is investigating allegations of collusive behaviour by the authorised investment managers of...
The FSA is investigating allegations of collusive behaviour by the authorised investment managers of a number of split capital investment trusts.
The FSA said the further research it was undertaking could potentially reveal a breach in the principles of the Code of Market Conduct of Principles for Business. The move comes as it has issued a discussion paper inviting views on how split capital investment trusts should be regulated, something that could ultimately result, the FSA has warned, in a change to the listing rules for split caps, designed to increase disclosure.
The focus of the discussion paper is on disclosure, governance and the guidance offered to intermediaries offering on the suitability of splits to their clients.
It follows a tough two years for the split capital trust market which has seen net asset values and share prices plummet as the markets have fallen. A number of highly geared trusts have breached the asset to loan ratios in their banking covenants.
There has also been concern about how large cross shareholdings in other split capital trusts affect a trust's hurdle rate.
The discussion paper, published on the FSA's website on www.fsa.co.uk, follows an FSA fact-finding exercise at the end of September when it gathered data on the 113 splits. It showed that 20% had more than 40% of assets in other splits, and 10% had over 68%.
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