UK Watchdog Proposes Stricter Rules for Investment Trusts Following Hedge Fund Raids
The Financial Conduct Authority aims to prevent shareholders from appointing themselves as asset managers.
The United Kingdom's financial regulator has announced plans to strengthen rules governing investment trusts, responding to criticism that it failed to adequately address actions by a U.S. hedge fund. The proposals from the Financial Conduct Authority (FCA) are designed to tackle conflicts of interest within UK trusts, which are investment vehicles that also function as publicly listed companies.
Saba Capital, a fund led by New York financier Boaz Weinstein, has targeted several London-listed firms over the past year. This activity has led to criticism from company executives, including those at Impax Environmental Markets Trust and Edinburgh Worldwide Investment Trust, who accused the FCA of inaction after Saba effectively gained control of their respective trusts.
The FCA's proposed rule changes would prohibit significant shareholders from voting on proposals that would allow them to nominate themselves as an investment trust's asset manager. Richard Stone, representing the Association of Investment Companies, stated that the proposals address a loophole where shareholders could seize board control to advance their own interests.