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MPs tell split-cap firms to act now on compensation

The Treasury select committee has told split-capital investment trust

companies to act now and compensate small investors rather than wait

to be told to do so by the FSA, ombudsman or law courts.

The Parliamentary committee published its report into the split-cap

crisis last week and called for redress for many small investors who

have seen their investments disappear as a result of collapsing

trusts.

But it hesitates from recommending compensation for all investors at

this stage. It says if the FSA or Financial Ombudsman Service

inquiries reveal evidence of disreputable practices by the industry,

then compensation claims could be extended.

Despite calling for fund firms to pre-empt action from the ombudsman,

it says that each compensation claim must be examined on its own

merits by the FOS to determine whether claims are valid.

It says the industry should establish a fund to compensate small

investors – a move the Association of Investment Trrst Companies has

already made with its announcement two weeks ago that it is aiming to

raise up to £10m from splits&#39 firms to offer redress to

investors.

The report marks the culmination of an eight-month inquiry conducted

by the all-party committee which has seen public rebukes for

high-profile figures such as former Aberdeen head of investment

trusts Chris Fishwick and former Brewin Dolphin head of split caps

David Thomas.

The report says: “We accept that not all individual investors in

zeros over the last five or more years are automatically entitled to

compensation but we are in little doubt that there is a wide range of

cases in which it will be found that compensation is justified.”

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