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FSA says split-caps are steering clear of crisis

The FSA has dismissed concerns that the split-cap investment trust industry is on the verge of crisis, saying that only a handful of trusts are even remotely in danger.

The regulator, which has been undertaking a review of the sector over the last two weeks, says that of around 115 split-cap trusts, only six are in risk of folding but only if the FTSE 100 falls below the 4,500 mark.

The FSA says a further 30 to 40 trusts would be in danger if the market dipped below around 4,000, which would be a fall of more than 20 per cent on this week&#39s opening level of 5,017.

The AITC welcomes the FSA&#39s findings but maintains that the scare of the past month has highlighted the need for clear literature and greater understanding of the risks of split caps, particularly concerning zero-dividend preference shares.

The AITC says it is starting a campaign to promote the use of standardised language and risk measures by provi-ders to bring greater clarity to the industry.

Communications manager Annabel Brodie-Smith says: “We have got to get this into perspective. There are market concerns that there are 30 or 50 trusts which may be vulnerable but this is only if there was a dramatic decline in stockmarket value.

“Although there has been concerns about the structure of split caps, the market is holding up better than expected. The industry has got to work together to bring this to a sensible solution for shareholders.”

FSA spokesman Rob McIvor says the regulator will not be publishing any guidance on the sector in the short term.

He says: “There is a general feeling that there may be some need for improvement but things are not quite as bad as people feared.”


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