Watchdog 'army' to probe splits

AN UNPRECEDENTED army of investigators is pursuing alleged wrongdoers in the £6bn split capital investment trust scandal, the City regulator revealed today.

Sir Howard Davies, chairman of the Financial Services Authority, said the probe was the biggest the FSA had conducted, with more than 60 staff assigned.

In a statement designed to defuse criticism that the FSA has not done enough to bring wrongdoers to book, Davies said the investigation had been broadened in recent weeks and hinted there would be a reckoning.

'The extensive enquiries we have made so far, involving enormous volumes of documentation and the review of many hours of taped conversations, have not discouraged us in our view that there is a serious matter to be investigated,' he said.

More than 35 individuals are understood to be under investigation. The spotlight is also thought to be on dozens of stockbroking firms and fund managers, including Aberdeen Asset Management, Collins Stewart and the Norwich Union fund management arm Morley.

Documents and emails that would fill 700 Lever Arch files were being reviewed. Tapes of conversations with dealers lasting 12 1/2 years in aggregate were being listened to.

'Many interviews have taken place and more are planned in the coming months,' it said in a progress report. The report was released as Davies and the FSA board prepared to be grilled at the FSA annual meeting today.

Its more aggressive stance is in marked contrast to its position 18 months ago, when it downplayed the scandal and ducked responsibility for it. Davies last year was accused by MPs on the Treasury Select Committee of being 'asleep on the job'.

About 50,000 people are estimated to have lost about £6bn on splits - sometimes complex investment vehicles with two of three different classes of capital.

Many were encouraged to invest as a way to save for school fees or to ensure a reliable retirement income. Many splits collapsed because they took on huge debt, or invested in tech stocks or both.

The FSA is investigating allegations that fund managers colluded to prop up ailing splits. It is also looking at alleged mis-selling by financial advisers and misleading marketing. The FSA has powers to fine companies and individuals and to bar them from the City.

MPs have lambasted City figures in the affair, including Chris Fishwick, formerly of Aberdeen, and David 'Dotty' Thomas, formerly of Brewin Dolphin.

Commissions clampdown

DAVIES promised that 'we have not gone soft on soft commissions', referring to the controversial way the multibillion pound fund management industry makes its money.

The comments were an attempt to allay fears the regulator had caved in to industry pleas to leave the commission payments system broadly as it is. The FSA recently extended its discussion period with the industry. 'The balance of responses has been in favour of making a change,' Davies said. Soft commissions - the goodies, from research to dealing screens and trips to lapdancing clubs, given to fund managers by stockbrokers - have traditionally not been disclosed to the ultimate bill-payers, the pension funds.

Davies hits out at chiefs

FSA CHAIRMAN Sir Howard Davies, at his swansong annual meeting today, attacked senior management in the City for failing to learn from past mistakes.

'The biggest disappointment of my time at the FSA has been the failure of firms, particularly senior management, to learn the lessons of past mis-selling,' he said.

The £11bn pensions mis-selling debacle 'should have been a stark lesson of the dangers of uncontrolled and unsuitable mis-selling' but the lesson had not been widely understood. 'Unfortunately, much of the industry remains focused on short-term gain from shifting product.'