BusinessCompany NewsFSA proposes diluted ‘splits’ rules

FSA proposes diluted 'splits' rules

The city watchdog has backed off from its plans to impose harsh new rules on investment trusts following last year's split capital investment trust scandal.

Link: Big firms named in ‘splits’ row

The watered-down rules will allow one annually elected representative of the asset managers, or their advisers to sit on trust boards.

It will also permit trusts to invest up to 10% of assets in other investment trusts that invest no more than 15% in other trusts, as long as they disclose the holdings monthly, the FT reported.

Last year, financial advisers, including large accounting firms, were named by law firm Class Law in a lawsuit on behalf of investors who lost out in the so-called ‘splits’ scandal.

Split trusts were marketed as a low-risk investment, but falling stock markets left investors out of pocket, leading to allegations that they were never low-risk.

The interdependence among the various split trust funds, which resulted in funds investing in one another, was also heavily criticised.

The new proposals were welcomed by the investment trust industry.

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