Select Committee on Treasury Minutes of Evidence

Examination of Witnesses(Questions 660-679)



  660. I am asking if you recommended to any of them they should invest in split capital investment trusts?

  (Mr Hall) The answer is yes.

  661. You will have done. You go on to say, in paragraph 12, that through your complaints procedure you are now examining whether individuals should have been advised to invest in splits in the first place. So by implication are you accepting that some of the advice you gave to the low risk investors may not have been correct?

  (Mr Hall) In certain instances, a minority, the answer is in the affirmative, yes.

  662. You will have given incorrect advice?

  (Mr Hall) In some cases we have. In the vast majority of cases I do not believe we did but we have an on-going process where we look at every individual case very carefully indeed.

  663. Do you think you are always operating completely objectively in recommending some of your clients to make these investments when you are paying Mr Thomas over £1 million a year to advise, or be with Brewin Dolphin, when he by his own admission is an architect of these split capital investment trusts?

  (Mr Hall) Yes, totally objectively. I have absolutely no qualms on that matter whatsoever. The two arms or divisions of the business are kept totally separate. Mr Thomas only markets his (insofar as he markets at all) to institutional investors. These investments were made with the intention that they were suitable investments for the clients. Suitability is the key issue. Whether or not we were brokers or it was declared, it has never been an issue and frankly has no particular relevance.

  664. You are personally satisfied you are not at risk of a perception of anything inappropriate when your company is paying over £1 million to Mr Thomas who is, by admission, an expert, a long advocate, of these split capital trusts which you are then recommending to your investors and which by your own admission you may have inappropriately recommended to some of your investors? Does that not look a bit odd?

  (Mr Hall) It certainly should not look a bit odd, Sir. I am aware of the nuance drawn in a particular television programme which was, in my view, both biased and definitely inaccurate in many matters, because we gave them the information and they drew a line through a number of clients who had invested in some of these funds before we bought that particular partnership even, so there was no question of it—it would not have occurred anyway but there was no question. So I am very confident on this particular line, those two businesses are kept separate.


  665. You mentioned the television programme, was that Moneybox on the BBC?

  (Mr Hall) The Money Programme.

  Chairman: There seemed to be pretty compelling personal evidence from, was it, Ronnie Morrison[29], Sue Kennedy and others in that programme about losing money. So I think you have a perception problem there.

Mr Tyrie

  666. I would like to ask some factual questions first of all. How many clients have you got in splits? How many private investors did you put into splits?

  (Mr Hall) The total number invested in splits—because we have been investing using this medium since the 1960s and we bought and sold them—

  667. The average life is seven years.

  (Mr Hall) I have not concentrated on that figure but naturally I have got figures for all those who have not performed as we would have wished in recent times. Perhaps I can throw that one over to Mrs Bowden who is heading the team investigating this so far as we are concerned?
  (Mrs Bowden) I do not have a figure which I am comfortable with of the total number of investors. We do know, for example, by looking at individual trusts how many we have in certain trusts but we do not have an overall figure.

  668. So you do not know how many people you have put in so far, even though this crisis broke a long while ago?

  (Mr Hall) What we are saying is that we have not brought here or got a figure for the ones which are in the trusts which are not at risk, which have performed up to expectations, many of which will have taken profits along the way for many years. As we all know they were a very useful, successful investment medium which lived up to expectations.

  669. I thought this was going to be a very easy question, I thought I was going to go bang, bang, bang with some factual questions and get some answers, but you are not giving them to me. You do not know how many people you have got in splits at the moment?

  (Mrs Bowden) Overall, no.
  (Mr Hall) We can give the figure of the ones which have not been successful.

  670. I am just asking how many are in splits and you do not know the answer. You have 80,000 private clients and you do not know what proportion are in splits?

  (Mrs Bowden) From the information I do have I know it will be a few thousand.

  671. How much do you think they have got invested? Do you know, roughly?

  (Mrs Bowden) If we look at the zero shares, they had invested around £200 million out of funds under management at the time of £16.8 billion.

  672. How many complaints have you had?

  (Mrs Bowden) 600-ish.

  673. I want to ask about the relationship between your corporate finance arm and the marketing of these. How many people are in the corporate finance department working on this with you, Mr Thomas?

  (Mr Thomas) Until recently I had about five. I have two less now. It is a very small team and I do not take any part in the marketing-to-retail investors at all.

  674. Who writes the research notes?

  (Mr Thomas) When I write them I write "David Thomas" underneath and I write, very seldom, quite long pieces. There are other people who can set themselves up as experts on certain areas, I do not have anything to do with what they write for their retail clients.
  (Mrs Bowden) David Thomas's research notes which he has referred to are not commonly used by the private client executives, so the people making those investment decisions are not reading the research he is producing for institutional purposes.

  675. So you can assure me categorically that the information being passed to private investors suggesting they invest in these products did not originate with, nor was it vetted by, any of the five, now three, staff in your corporate finance department?

  (Mr Hall) It certainly should not have been.

  676. My question was, can you assure me it did not?

  (Mr Hall) I do not believe it did, no. I do not know if any did but it certainly should not have done.

  677. If I may say so, you will say, "as far as I can recall" in a moment.

  (Mr Hall) I believe it did not.
  (Mrs Bowden) The responsibility for the documentation going out to private clients is with the private client team. The individual who looks after each private client has full responsibility for what goes to them and, frankly, if his views are diametrically opposed to David Thomas's or anybody else's in the firm, that is absolutely fine, he will do what he thinks is right for his clients.

  678. I would like to go back to the point I was making with Aberdeen a moment ago but with respect to what Brewin Dolphin have been up to. As far as I can understand it, we did have an old, relatively safe product until 1999 or thereabouts, but with the introduction of bank lending a different form of product was in practice created, one which had much riskier properties because banks could withdraw their lending. Am I correct as far as I have gone so far?

  (Mr Thomas) Yes, Sir. I listened with great care to that discussion—

  679. "Yes, Sir" will do for me just for the moment because I want to move on, unless you think it needs major qualification?

  (Mr Thomas) Qualifications later.

29   Note by Witness: Ronnie Morrison is not and never has been a client of Brewin Dolphin Securities Ltd. Back

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