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The City regulator is “incapable” of acting quickly to protect the UK investment trust sector from foreign predators, a senior peer has warned.
It comes as seven London-listed trusts face a showdown with US hedge fund Saba Capital, which aims to remove their boards and replace them with its own nominees, saying leaders have “failed shareholders” and taken bad decisions.
Baroness Sharon Bowles, a Liberal Democrat MP and board member of the London Stock Exchange, told The Mail on Sunday that the corporate foray into the investment trust industry had been encouraged by the Authority’s slow pace. of Financial Conduct (FCA) to respond to problems in the sector, which causes the prices of trusted shares to be affected, making them prime targets for acquisition operations.
He highlighted remaining EU rules that had made investing in UK trusts look more expensive than they actually were. This double counting, revealed by The Mail on Sunday last year, has discouraged savers from turning to investment funds, depressing their share prices.
The Labor Party and the FCA last year promised measures to solve the problem, but only after an industry campaign and they have not yet been fully implemented.
“I think the slowness of the authorities’ response to the cost issue and their lack of understanding of going straight to the top has led to Saba’s campaign and will be the end for more investment funds unless they take quick action now,” Bowles said. .
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“Furthermore, the FCA appears incapable of taking any kind of enforcement action to bring about change.”
Saba Capital, run by Wall Street financier Boaz Weinstein, has stakes in each company ranging from 19 to 29 percent and needs to gain the support of 50 percent of voting shareholders to succeed. As a result, you will win if other investors do not actively vote against the proposals.
The situation has seen the heads of the seven trusts call on small investors to exercise their voting rights and oppose Saba’s plans.
John Baron, a former Treasury Committee member who owns shares in the trusts, expressed concern about Saba’s ability, under current rules, to take control of the businesses without securing the support of a majority of investors. “This contest between David and Goliath calls into question the democracy of shareholders,” he said.
He called for efforts to “galvanize” retail investors and for the FCA to investigate whether small shareholders were adequately informed of their rights before the votes called by Saba.
This followed a letter from the Association of Investment Companies urging the FCA to change the rules so that all investors are automatically made aware of plans to change the investment trust’s strategy or its leadership.
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