19/08/2009 Author: Tony Griffiths

FSA approves of activist shareholder intervention 

Genuine attempts made by UK-based activist investors to improve corporate governance at investee companies have received the official seal of approval from city watchdog the Financial Services Authority (FSA).  

In a letter to trade associations, the FSA clarified the regulations regarding activism, saying that neither market rules nor those of the recently-enacted EU Acquisitions Directive prevented investors from engaging with management over matters of business direction.

The regulator also backed proposals made by Sir David Walker, author of July’s Walker report into corporate governance at major financial institutions, to strengthen shareholder engagement with the boards.

“There is nothing under FSA rules that prevents investors discussing matters when it is for a legitimate purpose,” said Alexander Justham, FSA director of markets. “Our letter provides clarity to investors that they are free to engage with the boards of companies as Sir David Walker envisaged.”  

London is home to a number of activist hedge fund firms, perhaps most notably The Children’s Investment Fund, managed by Chris Cooper-Hohn.

In a speech given in May, FSA chief executive Hector Sants called on investors to challenge management to ensure that their plans are credible.