FCA clarifies role and reviews investment trust governance
The Financial Conduct Authority (FCA) has clarified its role regarding investment trusts and announced a review of the UK Listing Rules. This review will examine board independence and related party provisions, addressing misunderstandings about governance and shareholder responsibilities.
Addressing governance misconceptions
Following a statement on March 3, 2026, regarding a review of UK Listing Rules for investment entities, the Financial Conduct Authority (FCA) has observed substantial debate and misunderstandings about investment trust governance.
Calls have emerged for the regulator to address voting rules that allegedly allow minority shareholders to repeatedly challenge trusts.
The FCA is concerned these misconceptions may confuse investors.
As FCA Chief Executive Nikhil Rathi highlighted at the Association of Investment Companies (AIC) conference on March 4, 2026, shareholders' ability to hold boards and managers accountable is a fundamental feature of investment trusts, not a flaw.
This blog post aims to clarify the FCA's role, remind participants of their powers and responsibilities, and outline the scope of its upcoming review.
Strengthening independence and conflict rules
The FCA's review will clarify that its related party and board independence rules apply to prospective investment managers and directors.
This ensures robust protections for minority shareholders against conflicts of interest in manager appointments.
Existing regulations, such as the Companies Act, mandate directors' fiduciary duty to exercise independent judgment.
The UK Corporate Governance Code also addresses director independence.
The FCA's rules require boards to act independently of their investment manager and secure independent confirmation for related party transactions.
This work is part of a broader UK capital markets reform, aimed at rebalancing risk and strengthening shareholder rights and accountability.