Today, the FCA has published a
consultation paper on proposed
changes to its UK Listing Rules for
closedended investment funds,
focused on the management of conflicts of
interest.
Closedended investment funds have a distinct structure,
operating as both listed companies and investment vehicles.
Shareholders appoint a board, which in turn appoints and oversees
the investment manager responsible for delivering returns.
Shareholder rights are central to this model, enabling investors
to hold boards to account and to influence key
decisions.
The review, announced in March as part
of the FCA's
ongoing work on the UK Listing Rules,
considers how its
rules support strong shareholder
rights and effective management of conflicts of interest in a
range of potential future scenarios. As part of good regulatory
practice, the FCA
has been stress-testing
how the rules would operate in different hypothetical situations
to ensure they remain robust over time and as markets
evolve.
This has included exploring a range of
plausible scenarios to test whether our conflicts of interest
framework would operate consistently in future. As a result of
this work, the FCA
has identified a small
number of targeted and proportionate adjustments to ensure
its rules continue to apply consistently in all relevant
scenarios. Specifically, they aim to:
-
Ensure the same protections that
apply to arrangements with an existing investment manager also
apply when a new manager is being appointed, to ensure
consistent protections for all changes to investment manager
fees and strategies.
- Recognise the association between a director and a
substantial shareholder that proposed them for a board
appointment, to strengthen the integrity of boards acting
independently of any investment manager.
- Recognise the conflict arising where a substantial
shareholder is also an investment manager and votes on material
changes to investment policies, to ensure that the rights of
minority shareholders are appropriately
protected.
The FCA believes
these changes are important given the
central role of the investment management contract in shaping
outcomes for shareholders.
Jon Relleen, director of infrastructure & exchanges -
supervision, policy & competition division at the FCA,
said:
Strong shareholder rights and minimal
conflicts of interest are crucial to well-functioning markets,
including for investment trusts. These proposals are targeted,
forward-looking changes to how conflicts of interest are managed,
reflecting the central role of the investment management
relationship for these
companies. We intend to be very careful to not interfere with
voting or shareholder engagement, and we want views on whether
these changes strike the right
balance.
The FCA welcomes
views by 14 August 2026 and
aims
to finalise rules before the end of
the year.
Alongside this consultation,
the FCA is also publishing examples of good practice to support retail
investors in exercising their voting rights, as part
of its
broader work to promote effective
shareholder engagement.
Notes to editor:
