On 19 August 2009, the FSA issued a press statement concerning its recent letter to trade associations concerning active shareholder engagement and the current regulatory regime.
The purpose of the letter was to set out how the FSA’s rules apply to activist shareholders who seek to work in concert to influence corporate governance in the companies in which they have invested. In particular, the letter emphasised that FSA rules do not stand in the way of the proposals for strengthening shareholder engagement with company boards made in the Walker report published for consultation in July 2009.
The letter concentrated on three regulatory areas which were thought to have caused concern:
- FSA rules on market abuse. These rules do not prevent investors from engaging collectively with the management of an investee company. However, trading on the basis of knowing other investors’ intentions or working together to avoid disclosure of a shareholding could constitute market abuse.
- FSA rules on disclosure of substantial shareholdings. These rules are unlikely to be triggered by ad hoc discussions between investors on particular corporate issues.
- Changes in control. Following implementation of the Acquisitions Directive, investors “acting in concert” require FSA approval if they reach a controlling interest (10 per cent. or more of the company’s shares) in a regulated firm. Although “acting in concert” is not defined in the Directive, the FSA does not regard the requirement as preventing ad hoc discussions or understandings between investors that are aimed at promoting “generally held principles of good corporate governance” in firms.
View FSA provides clarity for activist shareholders, 19 August 2009