Splits row firms will not budge

FIRMS at the centre of the split capital investment trust saga last week claimed they were 'underwhelmed' at the evidence and charges filed against them by the Financial Services Authority over alleged collusion.

Their indifference to the City regulator's case means the majority of the 21 firms are now hardened against further attempts to bring them to mediation.

John Tiner, chief executive of the FSA, has written to some firms setting out the City regulator's evidence. He has described the split capital trust saga as 'the worst misconduct' by City firms.

One executive said: 'The FSA's comments are just hyperbole. What about pension mis-selling?'

The firms have offered an ex-gratia payment of about £100m to compensate investors, but the regulator has so far rejected this.

One banker said: 'The FSA has been offered immediate compensation for investors. The top City law firms all claim it has no case, so it could be £100m now against potentially nothing in the future.'

The alleged collusion centres on shares issued by about 20 trusts in 2001. This followed the rapid decline in the stock market, which meant many splits were in danger of breaching banking agreements unless they were able to increase their capital base. Many were designated fund of funds, meaning they invested in each other's shares, and hence bought the new stock.

Tiner's charge list describes the share issuance as a 'rescue programme'. He accuses the firms of meeting to discuss, co-ordinate and formulate the programme, and of keeping records regarding the share issuance.

One banker said: 'How can there be a law against taking part in a rescue programme? Ironically if we had done nothing and let the trusts collapse without attempting to save them the FSA would not now be pursuing us.'

The FSA has dropped its investigation into allegations of mis-selling.