Splits mis-selling probe ditched

THE Financial Services Authority is to abandon its two-year probe into the mis-selling of split-capital investment trusts, the Financial Mail on Sunday has learned.

The move throws into doubt a similar inquiry by regulators in the Channel Islands.

The revelation came as John Tiner, chief executive of the financial regulator, cancelled tomorrow's summit with 21 firms to discuss a potential settlement for investors who lost money.

The regulator is now expected to concentrate its investigation on whether there were inherent problems with the structuring of split-capital trusts.

The inquiry was launched in May 2002 into allegations of collusion and mis-selling after about 40 of the 120 trusts ran into trouble.

Tiner's decision to abandon the mis-selling aspect of the FSA's investigation surprised the market. Harriet Quiney of City lawyer Reynolds Porter Chamberlain said some of the advertisements for split-capital trusts could be viewed as misleading, but added: 'The FSA is saying that it doesn't have a problem with those statements.'

Ironically, the regulator's own website promoted the trusts as 'lower risk' investments and continued to do so for five months after the launch of the investigation.

Quiney added that the structuring of split trusts would initially have been approved by the FSA 'who now say that they might not have been as good as they thought they were. That shows incompetence, which is never good for a regulator'.

It is believed that Tiner, who called each firm on Friday afternoon to individual meetings, was forced to abandon tomorrow's summit after it appeared that only a handful would attend.

It is understood that five firms have refused to discuss the matter further.