Split cap losers in legal action
INVESTORS who lost millions in the split capital investment trust debacle are preparing to sue Barclays Bank and private-client stockbroker TD Waterhouse. Accountants PricewaterhouseCoopers and Deloitte & Touche and broker Brewin Dolphin are also in the sights of Class Law, the solicitors mounting a class action.
News of the planned lawsuits emerged today as the man at the centre of the disaster said everyone was to blame, including investors who lost their money.
Martin Gilbert, chief executive of Aberdeen Asset Management, the biggest player in the split cap market, said it was 'everyone's fault to a certain extent' and that with hindsight it was 'blindingly obvious' the trusts were overgeared.
'People who invested, people who launched the funds, the banks who lent the money - we were all at fault,' he said. However, there was no mis-selling, said Gilbert, whose company manages about £2.3bn in 19 splits, including seven that are in trouble. Aberdeen has waived fees on eight trusts, including seven splits, in a move that will cost an annual £4.5m in lost income.
It held the interim dividend at 3.85p as it reported a rise in pre-tax profits before exceptionals and goodwill write-offs of £22.2m in the six months to March, up from £20.2m last time. Earnings per share slipped 6%.
Burnt investors were preparing to meet Class Law today to discuss suing Aberdeen and others involved in the split industry. It is close to issuing letters of claim against private-client stockbrokers and the wealth management arms of some accounting firms which recommended their clients invest in supposedly 'low risk' splits.
Splits, investment vehicles that separate income and capital returns, are nursing heavy losses because of falling share prices, high gearing and worries about the cosy network of cross-shareholdings between trusts. The value of split shares has fallen by about 20% to £13bn since August, with some trusts doing much worse than that.
Gilbert played down the Financial Services Authority inquiry into the industry, which he described as a fact-finding exercise. The FSA is looking for evidence of collusion and mis-selling in the industry. 'They have been to talk to us once. We're waiting for them to come back,' he said.
