Mr. R had invested in a split capital investment trust without first taking investment advice. He later discovered that the trust held shares in other split capital investment trusts, forming a so-called ‘magic circle’ of cross-holdings. Mr. R disapproved of this practice and complained to us that it had not been made clear to him that his investment would be managed on this basis We explained to Mr. R that we have no authority to investigate these cross-holdings.

Investment trusts are quoted companies (PLCs). Their business is the management of investments and their share price fluctuates in line with supply and demand, rather than according to the value of the underlying investments. Cross-holdings are, effectively, a commercial decision taken by the investment trust company. Firms’ commercial decisions are not within our jurisdiction. Even if such matters were within our jurisdiction, we would not have been able to look into this particular case. This is because Mr. R had not taken investment advice but had relied solely on his own judgement in deciding that the investment was suitable for him.