Split cap trusts face tough new rules
New rules to protect investors who put money into split capital investment trusts have been proposed by The Financial Services Authority.
The proposed rules, come in response to the ‘splits’ scandal of last year where investment companies were accused of misleading investors by selling the funds as low-risk, resulting in massive losses, when the stock market dropped.
Last October Accountancy Age reported how accounting firm that audited split trusts could face lawsuits from investors that lost money.
The new proposals aim to limit the risks investors face when investing in such funds, improve the information available to them and put in place restrictions on ‘cross-investing’ by companies under certain circumstances.
FSA managing director Michael Foot said: ‘The proposals should ensure clearer warnings about key risks; they propose a limit on one key risk – the extent of cross-holdings – and they underpin the rights of shareholders.’