Treasury officials who drafted the paper said some of those involved have already taken action in response to the outcry over splits, and ‘we have not taken a view on whether investment trust companies should be subject to additional regulation’.
But they suggested that if action is necessary, it should be applied to all investment trust companies and not just to those marketing the investment vehicle, which lead to large-scale personal losses during the collapse of 2002.
The Association of Investment Trust Companies has already produced a voluntary code of practice, and the paper states the Treasury must have regard to existing regulatory measures when considering proposals for changes in regulation.
The Treasury was obliged to act following an undertaking to the Commons Treasury Select Committee after MPs produced a scathing report on the operation of splits in the wake of the crisis, alleging evidence of collusion, cases of mis-selling and recklessness.
The companies are not subject to regulation by the FSA except for the operation of listing rules, the fact that most splits’ managers are also investment fund managers who are subject to regulation as authorised persons, and the fact that most – though not all – dealings in their shares are through authorised fund managers, stockbrokers or financial advisers.
The paper suggests the companies could be regulated on the same basis as unit trusts, brought within the rules applying to collective investment schemes, separately regulated in their own right or left as they are.
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