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Concern at FSA split-cap delay

IFAs have criticised the FSA for failing to act sooner to prevent fund managers issuing marketing material which failed to spell out the risks that some split-capital trusts can pose to investors.

In a report issued last week, the regulator pledged to formally investigate investment trusts it believes were guilty of producing marketing literature for advisers and investors portraying splits as low to medium risk.

But IFAs say the FSA should have acted to ban material which made outlandish safety claims rather than waiting until some investors had lost up to 95 per cent of their money.

With the FSA poised to investigate the role of advisers, IFAs fear they may bear the brunt of the split-cap saga despite the fact that many trusts claim that their literature was fully compliant with the guidelines laid down by the regulator.

Some of the more excessive marketing went as far as to comparing the risk with that of corporate bonds and many IFAs voiced concern and stopped recommending the trusts.

MPs are believed to be considering asking FSA chairman Howard Davies to appear before the Treasury select committee to explain the investigation in greater detail.

Simpsons of Brighton IFA partner Andrew Merricks says: “The FSA just does not understand or even have a working knowledge of the products it is regulating. The marketing literature for split caps was there for all to see.”

FSA spokesman Rob McIvor says: “I will not comment on opinion but it is a nonsense to say that we do not understand the products. It is easy to be wise after the event.”

Split caps cleared, p14


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