FSA proposes diluted ‘splits’ rules

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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