FSA rules will not mar shareholder activism

Recent financial crisis has compelled the UK government to review its finance sector. The government wants institutional investors to play an important role in managements' decisions via questioning and collective shareholder agreements.

The Financial Services Authority has stated that its "concert party" rules will not hinder the way of stronger bank-shareholder activism as investors can join forces on inspecting an institution's strategy with out fear of violating regulations on collusion and market abuse.

It was informed that the new regulations are only to make management and other investors aware of when groups of shareholders are joining to influence the listed companies.

As per Robert Jenkins, who is the chairman of the Investment Management Association, when asset managers joined to lobby for change at specific companies they should be exempted from the rules.

Market-abuse rules dictate that when investors have a common voting strategy, they are required to declare their total shareholdings to the market.

The FSA further said that ad hoc conversations among shareholders regarding corporate governance would not be captured by the market-abuse rules.

FSA's director, Alexander Justham, said, "There is nothing under FSA rules that prevents investors discussing matters when it is for a legitimate purpose."