The fund managers and stockbrokers that ran offshore split capital investment trusts which collapsed...
The fund managers and stockbrokers that ran offshore split capital investment trusts which collapsed between 2001 and 2003 have until the middle of March to decide whether to comply with the regulator"s demand for them to compensate investors for their losses.
The order to the companies by the UK"s Financial Services Authority (FSA) came at the start of March as the regulator pursues its investigation of the causes of the splits" collapses for illegal collusion and/or misleading marketing.
The FSA"s 60-strong team has listened to 27,000 taped conversations and examined splits" share issues between 2000 and 2002.
John Tiner, chief executive of the FSA, ordered the heads of the 21 companies to join a compensation process or risk enforcement action. Even under this compensation process disciplinary action can be taken and it would not affect individuals already under investigation.
The FSA said: "We do have the option to take the enforcement action if they do not participate and if we have sufficient evidence."
The groups, including BC Asset Management, LeggMason Investors and Aberdeen Asset Management, have previously declined to comment on the FSA"s meeting. However, other heads of investment trusts for fund managers not caught up in the meeting said it could be taken as a sign of weakness.
One head of investment trusts at a large fund manager who saw the crisis coming and refused to issue any highly geared or heavily cross-invested splits (that subsequently collapsed when the markets fell), said the FSA"s meeting was a sign it had no evidence of illegality and that it was trying to pressurise the groups into compensating without admitting its weak hand.
As well as the suspended 26 splits, 10 of which are based offshore in Jersey and Guernsey, another handful have already been liquidated or are the 'walking dead", where assets are less than liabilities.
About £6.5bn was wiped from the sector between 2001 and 2003 as the market falls and high gearing and cross-holdings between some splits lead to funds collapsing.
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