The Treasury have suggested to the industry regulator, the Financial Services Authority (FSA) that an industry-wide review should be conducted into the split capital investment trust market.
In simple terms "splits" are where shares were divided into income producing dividend shares and capital growth shares. The capital growth element is obviously the element that has seen significant falls in value.
The FSA has declined the Treasury call.
Our view
The debacle on people being sold split capital investment trusts and these collapsing is, in our opinion, not a mis-selling scandal if people understood and had the risks explained.
As an independent financial adviser we did not and have not advised on a single split but many were sold and many have lost money.
Therefore, the issue should be dealt with under normal advisory regulations rather than setting up a separate review. The problem with the financial services industry is that whilst regulation is tighter now than it ever was and advisers generally to take great care in explaining the risks involved, if the market goes down and people lose money the "knockers" scream from the tree-tops "Mis-sold and compensation please".
If people genuinely have not had the risks explained to them about any investment they may then, of course, an investigation and redress should be looked at but this can be dealt with within existing regulation.
We wonder if there would be any debate at all had the markets gone the other way and people were making tidy profits on their investments?
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