AIC raises regulatory concerns with FCA about Saba proposals

Retail shareholders’ interests must be protected.

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The Association of Investment Companies (AIC) has written to the Financial Conduct Authority (FCA) to raise concerns about the protection of retail shareholders’ interests. This follows Saba Capital Management’s requisition of general meetings at seven investment trusts. The AIC’s letter focuses on the role of platforms under the Consumer Duty, and the importance of board independence for investment trusts.  

Following Saba’s action, we are concerned that the current regulations do not protect the interests of retail shareholders.

Richard Stone, Chief Executive of the Association of Investment Companies (AIC)

Richard Stone, Chief Executive of the Association of Investment Companies (AIC)

Role of platforms

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Following Saba’s action, we are concerned that the current regulations do not protect the interests of retail shareholders. Saba is targeting investment trusts with a high percentage of retail investors, so it’s vital they have their say on the activist’s radical proposals to replace the board, change the investment strategy and become the investment manager. We are relying on platforms’ support to get this information out to their customers and encourage them to vote. Thankfully they have been broadly supportive of our call for action.

“With so much at stake, the regulator can’t just rely on people doing the right thing. Platforms have important obligations under the Consumer Duty to support their customers’ understanding of Saba’s proposals and any others in the future. We believe investors should be automatically opted in to receive communications on corporate actions. When significant changes to an investment trust are proposed, platforms should actively contact their clients to encourage voting. We want voting to be accessible and made clear and simple for all customers.”  

Independence of directors

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “The FCA needs to urgently explain its views on the independence of directors under the Saba proposals. If Saba wins the vote and is proposed as manager, how will potential conflicts of interest be managed?

“The FCA must review the scope of board independence in the Listing Rules. Saba’s campaign raises questions about the independence rules if they permit a significant shareholder, who may have a conflict of interest, to effectively select board members – particularly when those board members may go on to appoint that shareholder as the asset manager.”
 

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Notes to editors

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