Investment trusts face crackdown

INVESTMENT trusts could face tougher regulation under plans unveiled by the Government. The Treasury has launched a consultation on whether investment trusts should be regulated by the Financial Services Authority.

Currently, investment trust companies aren‘t regulated so the FSA has no power to intervene on their activities.

The Financial Ombudsman Service is also not available for investors for complaints about investment trusts or their managers.

Among the options suggested by the Treasury are to put investment trusts on the same FSA regulatory footing as unit trusts and also to regulate people who run trusts.

The consultation follows a recommendation from the Treasury Select Committee in 2003 that the Treasury should consider tightening regulation of investment trusts following the split capital investment trusts debacle, which led to heavy losses for thousands of savers.

The Association of Investment Trusts welcomed the consultation and said it was 'open minded' about possible change.

Director general Daniel Godfrey said: 'We will be looking carefully at the issues raised in this consultation to see whether there are areas where improvement is still possible.

'For example, investment trust investors‘ access to the Financial Ombudsman Service remains an outstanding area which needs to be addressed.'

He added it was vital to preserve the features of investment trusts that made them attractive to investors.

'These features include the stock exchange listing, the closed-ended structure, independent boards and the ability to gear and issue different share classes.'

The consultation will run to Fenruary 25 2005.