The Financial Services Authority is considering changes to its listing rules to force firms dealing in split-capital investment trusts to disclose more financial information.
But first the Treasury may have to change the law to bring investment trusts firmly into the regulatory net. This could be done by extending the Financial Services and Markets Act 2000 or revising listing requirements for quoted trusts.
The indication that changes are likely came when Sir Howard Davies, chairman of the FSA, and his managing director John Tiner, were facing questions from the Treasury select committee. The Association of Investment Trust Companies (AITC) had already been pressing members to hand over details of their investments, but Davies and Tiner suggested that if trusts failed to do so the FSA could force them to disclose the information.
The financial watchdog is under pressure for not acting quickly enough to prevent the collapse of the 15 billion [pounds sterling] market in split-cap investment trusts. Doubts about these trusts emerged four years ago, but the FSA did not investigate them until last year. Of 135 trusts, 19 have had their shares suspended, eight have called in the receivers and at least 10 more are expected to collapse. Now the select committee is holding an inquiry into how it happened.
At the centre of the affair are allegations of cosy dealings between a "magic circle" of brokers, trust managers and directors, who...