By Jenny Culshaw BBC2's Working Lunch

MPs in the Treasury Select Committee have lashed out over the disastrous losses investors suffered from split capital investments.

'Split caps' are a specialist investment which many people became ensnared in before the stock market began its recent drop.

The trusts are complex and some are inherently risky. They hold many shares and a number have high debts and invest in each other.

On Tuesday, the Financial Services Authority (FSA) defended itself against the allegation that it failed to protect consumers.

Investors

About 50,000 investors are thought to have lost out after they put their money in what they were led to believe were safe investments.

Solicitor Stephen Alexander represented investors

Stephen Alexander from solicitors Class Law represented 700 investors in front of Tuesday's committee. He accused some directors of split cap trusts of colluding:

"The more the funds went up, the more they purchased each others shares, the greater they earned out of the funds."

He claims the FSA failed to warn investors of the risks with split caps.

The FSA says it wasn't responsible for what was in the stock market prospectuses for split caps.

"We do not regulate investment trusts and therefore we do not regulate split capital investment trusts," John Tiner of the FSA told the committee.

"Our responsibility is towards the activities of fund managers."

Complaints

Many investors are at a loss as to what to do or how to complain.

The Financial Ombudsman, Walter Merrick, says he has now received about 1,000 complaints but that many people who get in touch don't know who they are meant to complain about.

"We are having to assist complainants in explaining to them against whom it is possible for them to sensibly make a complaint - if that's what they want to do," said Mr Merrick.

Warning

The committee sent the FSA's representatives back to their offices to check up on an alleged tip off about split caps. It was claimed that that they had received a warning from Guernsey's financial regulator before the split caps affair erupted.

However, the chairman of the Treasury Select Committee, John McFall, told BBC2's Working Lunch that he has a letter from the regulator in Guernsey which says that he did not pass on a warning.

It is estimated that investors have lost �700m in split caps. Mr McFall says he hopes those who deserve it are compensated and that the industry is cleaned up.

"We want to ensure that when people are looking at literature and they are told it is low risk then indeed they are low risk."

The committee says it expects a letter from the FSA 'soon' to clarify the Guernsey issue.

A final report is expected before Christmas.