Investors who had burned their pockets in the split-capital investment trust scandal may finally have some relief coming their way. They can now be compensated for the huge losses suffered in split-capital investment trusts by requesting for compensation from the firm established for claims, Fund Distribution Limited (FDL).
However, things are not as easy as they sound. The compensation package for 50,000 people will be given to the eagerly awaiting investors, probably only at the end of the year. Moreover, the amount of losses that would be accounted for could not be specified, as the number of claimants for the compensation was overwhelming and the compensatory fund with FDL, limited; £144 million. Ryan Hughes, of Chartwell Investment Management, spoke about the issue saying, “With estimates of the total cost of the split-cap debacle running as high as £600 million, it could average as little as 25p in the pound. There is a finite pot of money, so the more successful claimants there are, the less each one will receive.”
Among the various classes of shares in the split-cap trusts, the investors in zero-dividend trusts are expected to mainly constitute the claimants. Falsely claimed to be low-risk products while being sold to vulnerable customers, split-cap trusts instead proved to be quite complex, involving considerable risk. The huge debacle of the split funds sector ensued as a result of major conspiracies and manipulations within the management groups of the fund. Contriving to buy each other’s shares in their funds, managers caused the prices of the trusts’ shares to rise deceptively, overstating the value of the fund.
Subsequently, a slump in the stock markets saw these cross-holdings and surplus borrowings of the trust proving lethal. However, the inventors and culprits for this collapse appear unharmed and in fact, can be seen prospering, with most of them earning well enough to afford a luxurious living. It is, really, no wonder that compensation is being offered to misled investors purely because the criminal action threat against the trusts’ managers has been revoked.
Nevertheless, the city watchdog, The Financial Services Authority (FSA), now has renewed powers to take such scheming and sharp investors to task more severely, and will hereafter not let any swindler go scot-free, or rest after a minor punishment after cheating millions of people of huge amounts of money.
Posted
on : Mon, 25 Apr 2005 00:00 GMT | Investments News
By : Pippa Fielding
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