The news will be a blow to the profession, currently reeling from the Enron fallout and alleged auditing failures, including Equitable Life and Independent Insurance.
It will also dent confidence in the profession as it moves away from auditing services into lucrative independent financial advice.
‘Potentially accountants are in the frame if they have been giving advice to clients who were getting into these schemes,’ said Stephen Alexander of Class Law, the legal firm acting on behalf of a number of disgruntled investors. ‘There could possibly have been negligence here,’ he added.
Alexander said his primary target would be the trust funds involved in the so-call splits debacle, but part of his review would involve looking at the advice given by other advisers.
Although he would not name individual accountancy firms, he told Accountancy Age that he had received complaints about most of the large firms.
‘They may be primarily liable,’ Alexander said.
Splits are investment trusts with several types of shares separating income from capital returns. The zero dividend share class, which promises to pay out a pre-set capital sum on a certain date without paying income, has attracted particular concern.
Such investments were seen as low-risk for smaller investors.
But the interdependence among the various split trust funds – where funds would invest in each other – has forced the Financial Services Authority to start an investigation following warnings from stockbroker Cazenove as early as last July. ‘This is a warning to those carrying out advisory work – how much reliance was there on the glossy brochures?’ Alexander said.
The first meeting of the Class Action splits group is due to take place next week to consider what steps they should take.
However, it is understood that the ICAEW has not received any complaints about its members in relation to advice given on the split trusts.
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