UK mulls investment trust rule changes

Minority shareholder protections are the key focus of the reforms.

The UK's Financial Conduct Authority (FCA) has proposed changes to the listing rules for investment trusts following a series of campaigns by activist investor Saba Capital, marking the regulator's latest effort to strengthen shareholder protections while preserving investor rights.

The proposed reforms would introduce additional safeguards to address potential conflicts of interest when significant shareholders attempt to influence the management of investment trusts by nominating directors or appointing investment managers.

The FCA added the reforms would strengthen protections for minority shareholders when key investment policies are put to a vote. The proposals are open for consultation until August 16.

The review follows a series of campaigns by U.S.-based activist investor Saba Capital, led by Boaz Weinstein, which has targeted several UK-listed investment trusts over the past two years.

Earlier this year, Saba succeeded in replacing the board of Edinburgh Worldwide Investment Trust, prompting then-Chairman Jonathan Simpson-Dent to call for closer scrutiny of the existing regulatory framework over concerns a 30% ownership threshold was too low.

The FCA has not singled out Saba in its consultation, but the timing of the proposals reflects growing concern within the investment trust industry that existing governance rules have struggled to keep pace with increasingly sophisticated activist campaigns.

Activists have long argued that intervention can unlock value in underperforming companies and investment trusts, however regulators are increasingly focusing on protecting minority investors.

The FCA is expected to consider feedback from market participants before finalizing the new rules later this year.

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