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Farrow’s view

It was of little surprise that the split-capital investment trust settlement was finally agreed on Christmas Eve – it seemed destined to be that way.

Much has been said about the FSA being a tad sneaky in making the announcement before the only day of the year when newspapers are not published. In the event, it only delayed the inevitable coverage that followed.

It did, of course, ruin any hope of getting to the pub for a festive sharpener or two for the FSA press officers or the handful of financial journalists still working.

It has been a sorry saga and, despite confirmation that 194m has been raised to compensate victims of the scandal, it is not over yet. Four firms and several individuals are still under investigation while thousands of people who held anything but zero shares have been left to fight their own corner.

Although both sides will undoubtedly claim victory, the regulator has come in for the most criticism over the past fortnight. When the FSA summoned the 21 firms to its Canary Wharf HQ in March, chief executive John Tiner did his Dirty Harry act – if the firms felt lucky and dared mess with him, he would take them down.

The FSA boasted that it had reviewed some 780 files of evidence, entered 51,000 records on the inquiry’s database, listened to 27,000 taped conversations, made 17 site visits and conducted over 70 interviews.

The 60-strong investigative team had examined prospectuses and financial promotions and looked closely at the numerous restructurings and new issues that took place in the splits sector during 2000-02. In short, the regulator gave the impression it was going to nail the whole damn lot of them.

But it did not. The lawyers representing the infamous 21 were hardly running scared when they finally got their hands on the evidence. On advice, the firms felt more than lucky and refused to capitulate to all the FSA demands, the sticking points being the treatment of individuals and culpability. The impasse made a compromise the only option – it was just a question of how much.

The figure of 194m was probably as much as the FSA could have hoped to raise. The question now is how much money zero investors will get back. The firms reckon it could be as much as 73p for every 1 invested, others suggest it could be as little as 50p. A lot will depend on how many investors apply and are eligible for a payout.

But not everyone will be satisfied. For starters, the FSA has glossed over the allegations of collusion and failed to get an official admission of guilt from any party.

However, the firms have stumped up millions and certain individuals have “voluntarily” agreed to abstain from seeking regulatory approval. Make of that what you will.

Not all zero investors will get a handout. BFS, BC Asset Management dropped out of the settlement process claiming poverty while Exeter pulled out at the last minute because it did not realise investors in its unit trusts could get a payout and still take the firm to the Financial Ombudsman Service. BFS, BC and Exeter are believed to account for one-third of zero losses and these investors will not get a penny from the agreement.

Many individuals working for these firms have made buckets of money, yet investors who held zeros managed by them are being left high and dry. Rumour now has it that Iimia, the new owner of Exeter, will put the relevant subsidiaries into administration, which could severely cap any redress due.

At least investors in the infamous Aberdeen progressive growth trust will get their money back, thanks to Aberdeen’s “uplift package”, but it still leaves a sour taste in the mouth. Aberdeen has fought against the Financial Ombudsman Service over this particular case of misselling for months and it still refuses to say it did anything wrong. The advert stating: “At last, a one-year-old that lets you sleep at night” lured thousands of investors and it promptly fell by 75 per cent. How is that not misleading?I do not blame investors for grabbing the chance of a refund – many aren’t in a position to do anything but accept – but I hope some continue the fight for compensation, which many surely deserve. At the last count, more than half of the 300 people who complained to the FOS had yet to accept the uplift offer. Watch this space.

Paul Farrow is a personal finance reporter at The Sunday Telegraph

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