Financial Conduct Authority accelerates review of UK Listing Rules to clarify board independence and related-party provisions for investment trusts

The Financial Conduct Authority (FCA) has published a blog setting expectations for its brought-forward review of the UK Listing Rules for investment entities, prompted by recent debate about investment trust voting and governance. The FCA seeks to clarify where responsibilities sit, noting that shareholder voting rights are largely a matter of company law rather than listing rules, while the FCA’s review will test whether its rules remain fit for novel circumstances. Voting rights are framed as being set in law under the Companies Act and overseen by the Department for Business and Trade, with boards having legal powers to set aside resolutions in limited circumstances where a high bar is met. By contrast, FCA listing rules apply to issuers and cover governance protections such as requiring boards to be able to act independently of investment managers and requiring additional protections for related party transactions, including board approval and written confirmation from independent sponsors that terms are fair and reasonable to shareholders. The FCA’s targeted review will consider whether amendments are needed to make clear that its related party and board independence rules apply to prospective investment managers and directors, including to ensure minority shareholders have protections against conflicts in the terms on which managers are appointed; the broader workstream also considers whether to adjust listing rules to provide a listing route for a subset of undiversified investment entities.