FSA Clarifies How Its Rules Apply To Activist Shareholders

The Financial Services Authority has moved to deny that there is any inherent contradiction between its role as a regulator and its support for increased shareholder engagement.

In an open letter to the Institutional Shareholders' Committee (which comprises a number of investor bodies) the FSA's Managing Director for Wholesale Markets explains how shareholders who wish to work together to promote effective corporate governance in investee companies can do so without falling foul of the market abuse regime.

Any alliances between investors must, however, be based on specific ad hoc corporate issues rather than a long-term agreement to vote together, and the investors must not deal on the basis of unpublished information they obtain while working together.