The City regulator has launched an investigation into troubled fund management company Aberdeen Asset Management, the Financial Times has reported.

The Financial Services Authority's probe of Aberdeen follows a year-long inquiry into the mis-selling of so-called split capital investment trusts, and possible collusion by split capital fund managers.

Aberdeen Asset Management is the UK's biggest split capital investment manager, with responsibility for 19 split capital funds.

Companies found guilty of mis-selling or collusion could face fines, while individual managers could be banned from working in the City.

Scrutiny

Split capital trusts are specialist funds which issue different types of shares offering different types of returns.

Investors can choose to buy shares which aim to provide either a steady income, or take a riskier bet on products which yield higher returns.

The trusts are popular with people saving for retirement or school fees.

But stock market falls have reduced the value of some trusts by up to 90% over the last three years, leaving many investors nursing heavy losses.

Misleading

The FSA's inquiry into the split capital industry has focused on allegations that some trusts colluded to prop up share prices by investing in each other.

It has also looked into whether some investors were misled over the level of risk associated with their investment.

Aberdeen's own share price has come under pressure in recent weeks, partly because of fears that it might face fines as a result of the FSA's investigation.

The FSA is believed to be scrutinising other fund management companies, the Financial Times reported.