The Association of Investment Companies has urged the Financial Conduct Authority to “go one step further” with its listing rule reforms.
The AIC said that when a substantial shareholder seeks to take control of the management contract of an investment trust, this should be subject to the approval of all other shareholders. It said that its proposal would not stop a shareholder taking over as manager, but would ensure that this cannot happen against the wishes of other shareholders.
It has also urged the FCA not to build in a four-week delay before the implementation of new rules to protect shareholders.
The AIC’s lobbying for tighter listing rules follows gaps in the rules exposed by Saba Capital.
Richard Stone, chief executive of the Association of Investment Companies, said: “We support reform of the Listing Rules to manage conflicts of interest and the FCA has come up with some good proposals. However, we believe that the regulator needs to go further to close gaps in the rules exposed by Saba Capital.
“This is not about weakening traditional activism. It’s about dealing with situations where one substantial shareholder stands to gain at the expense of others – for example, by taking over the management contract of an investment trust. It’s not just a Saba issue – any prospective manager could exploit the same loophole.”
Referring to the FCA’s proposal for a four-week delay before any changes to the listing rules come into effect, Stone warned the negative consequences of this measure “far outweigh any positive ones” and said shareholder protections should be implemented as soon as the regulator has made its final decision.
He added: “The management contract of an investment trust is a substantial prize. As recent events have shown, existing rules do not provide enough protection for ordinary shareholders against one substantial shareholder who is motivated to take over that contract.
“Our targeted proposals would ensure shareholders are better protected without getting in the way of traditional activism that benefits all shareholders equally.”
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