The Association of Investment Companies (AIC) said it has written to the Financial Conduct Authority (FCA) and the Department for Business and Trade “calling for action to protect retail shareholders’ interests.”
The AIC said its dramatic move follows activist New York hedge fund Saba Capital’s “repetitive attacks on Edinburgh Worldwide Investment Trust.”
The AIC’s letters suggest a number of measures “to defend shareholders’ rights and ensure a fair and democratic process.”
The AIC has 276 members and the industry has total assets of £268 billion.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “It’s time for the regulator and government to get to grips with the threat that Saba poses and act to support UK companies.
“Is it fair that an investment trust needs to achieve repeated record turnouts to avoid Saba taking control against the wishes of the vast majority of all other shareholders?
“How can shareholders make an informed decision when individuals nominated for election to the board are silent on their intentions for the company and do not subject themselves to shareholder scrutiny? Why can an activist force repeated votes on the same proposals in such a short space of time?
“There should be a limit to the number of times a meeting can be requisitioned by the same shareholder making similar proposals.
“The current legislation does not give boards sufficient powers to stop the same proposals being brought forward repeatedly by a single shareholder when they have already been rejected. This creates a distraction and cost to the detriment of other shareholders.
“Shareholders need to be able to make an informed decision about who serves on a board. Nominated directors should be required to explain their plans for the future of the company and be subject to investor questioning and scrutiny. It is absurd that they can be absent from the very meeting where they are seeking election.
“Directors must represent all shareholders. Our priorities for voting reform therefore include changing the related parties rules so that directors nominated by a significant shareholder must win the support of other shareholders, excluding the significant shareholder, to be elected.
“More needs to be done to enable retail investors to routinely vote their shares. Under current law, shareholders could agree for their shares to be automatically voted in a particular way, for example to vote in line with the board’s recommendations.
“The regulator needs to give platforms confidence so they can implement this and encourage them to do so. We urge the regulator and government to take action to support investment trusts and other UK companies from persistent attacks and protect retail shareholders.”