Split-cap rescue deal fails

13 April 2012

THE full weight of the FSA could be about to fall on companies involved in the split-caps scandal that have refused to take part in negotiations about compensating victims of the savings debacle.

The country's chief financial watchdog announced today that a private meeting with the chairmen and chief executives of 21 unnamed firms that have acted as fund managers or brokers to split capital investment trusts failed to produce the hoped-for solution.

The FSA wants them to put £350m into the compensation pot, but the amount some of the firms have offered is so far short of that figure that the FSA says these discussions are now at an end.

The FSA has had a staff of 60 investigating the split-caps issue and several firms have been shown outlines of the cases that would be made against them 'to assist them in considering their positions'.

The investigations concentrated on whether there was active 'collusion' or a magic circle with firms investing in one another, which aided a domino-like collapse of the sector that cost 50,000 savers £650m.

The FSA added: 'Firms that have already indicated that they are willing to participate in the mediation process are now engaged in constructive discussions about resolution of the issues, including payment of appropriate compensation. The FSA intends to continue with those discussions.'

The FSA is continuing its enforcement investigations against firms that have refused to take part in the mediation and will begin referring cases to its 'court' - the independent Regulatory Decisions Committee, in June. The RDC has the power to impose huge fines.

In the meantime, the FSA says the firms can join the mediation process if they agree to take part on the basis proposed by the FSA.

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