Misplaced trust of Equitable units

By DAILY MAIL REPORTER
Updated: 19:00 EST, 4 June 1999

Equitable Life is paying out a total of £700,000 in compensation to 5,500 customers of one of its unit trusts after it discovered it was breaking the rules over what it can and cannot invest in.

The unauthorised investments in its flagship Equitable International Growth Trust, go back as far as a decade. Equitable Life's Alistair Dunbar says they uncovered the problem. The trust is worth about £250 million.

The company did not correctly identify what some of its investments exactly were and so allowed them into the unit trust when they shouldn't have.

He says the company has looked at every investor's position to see if they would have been better, or worse off if the trust had invested in authorised investments.

Equitable Life has found that 5,500 of the 7,500 investors need to be compensated by an average of £127 each. Mr Dunbar says: 'There are some very subtle types of investments that we use on our exposure to emerging markets. 'Some of the investment rules are quite complex and some of the instruments we use are complex, too. We discovered that we did not correctly identify some of these particular sorts of assets.

'We looked at the investment performance of the trust and said if, instead of investing in what we shouldn't have, but invested in what we should, what the unit price would have done. We have owned up and protected every-one's interests.'

Equitable Life says it told its regulator as soon as it discovered the problem. City watchdog the Financial Services Authority says it does not comment on individual cases. But it says that one major regulatory requirements is for firms to tell it about any problems they may come across.