In an effort to bolster investor protection, the U.K.’s Financial Conduct Authority (FCA) is consulting on proposed changes to the rules for listing closed-end funds.
In a consultation paper on proposed changes to its listing rules, the FCA is seeking changes designed to improve the management of conflicts of interest in these vehicles.
“Our aim is to ensure existing rules work consistently and robustly, in future scenarios, and to reduce the risk of harm to shareholders — particularly smaller investors,” the regulator said in the paper.
Among other things, the proposed changes aim to ensure consistent investor protections when fund managers are replaced and fees are changed, enhancing board independence, and protecting minority shareholder rights when major shareholders are also the fund manager.
“Strong shareholder rights and minimal conflicts of interest are crucial to well-functioning markets, including for investment trusts,” said Jon Relleen, director of infrastructure & exchanges in the supervision, policy and competition division at the FCA, in a release.
The reforms to the U.K.’s listing rules are being proposed in the wake of a review, which identified several areas of concern for regulators.
“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,” the FCA said. “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 proposals are out for consultation until Aug. 14.
The FCA said it aims to finalize its policy in this area by the end of the year.