Splits scandal firms shun peace offer

THE Financial Services Authority has failed in its attempt to reach a settlement with 21 firms involved in the split-capital investment trust scandal.

John Tiner, chief executive of the City regulator, told the firms at a meeting on 2 March that he needed at least five signatories to proceed with a settlement.

But only three of them - believed to be Legg Mason, Gartmore and Govett - have indicated their willingness to proceed with mediation.

Gartmore, which acquired Govett last year from Allied Irish Banks, was formerly chaired by Paul Myners, who recently led a Government-sponsored inquiry into the fund management industry. Legg Mason, whose headquarters are in Baltimore, has pulled out of the UK market.

The remaining firms have indicated that they are unwilling to commit to an open-ended liability on compensation and damages, rejecting Tiner's demands for a general admission of wrongdoing.

The firms and their lawyers believe that the FSA will find it difficult to prove any wrongdoing. However, they have indicated a willingness to resolve the scandal, which saw millions of investors lose money in supposedly low-risk investments.

It is believed that they want the FSA to appoint mediators agreed by both sides. The firms are unwilling to work with Lord Alexander, former chairman of NatWest bank, who was appointed by the FSA without consultation. The regulator has yet to respond.

The FSA declined to give a 'case by case update' but said: 'There are some things we need to discuss with the firms and we will do that.'