FCA launches consultation on targeted listing rule changes for closed-ended investment funds
The Financial Conduct Authority (FCA) has launched a consultation on proposed changes to the UK Listing Rules for closed-ended investment funds, focusing on strengthening the management of conflicts of interest and reinforcing shareholder protections.
The consultation follows a review announced by the regulator in March as part of its wider programme of work on the UK Listing Rules. The FCA said it examined how the existing framework would operate across a range of potential future scenarios to ensure the rules remain effective as markets develop.
Closed-ended investment funds operate as both listed companies and investment vehicles. Under this structure, shareholders appoint a board, which is responsible for appointing and overseeing the investment manager. According to the FCA, shareholder rights play a central role by allowing investors to hold boards accountable and influence significant decisions.
As part of its review, the regulator stress-tested its rules against several hypothetical situations to assess whether the existing conflicts of interest framework would continue to function consistently. Following that review, the FCA identified a small number of targeted and proportionate adjustments to ensure its rules continue to apply consistently in relevant future scenarios.
The proposals aim to ensure that the protections currently applied to arrangements involving an existing investment manager would also apply when a new investment manager is appointed. The regulator said this would provide consistent safeguards for changes relating to investment manager fees and strategies.
The FCA also proposes recognising the association between a director and a substantial shareholder who proposed them for board appointment. It said this measure would strengthen the integrity of boards acting independently of any investment manager.
In addition, the consultation proposes recognising potential conflicts where a substantial shareholder also serves as an investment manager and votes on significant changes to investment policies. The FCA said this would help ensure that the interests of minority shareholders remain appropriately protected.
The regulator believes these targeted amendments are important because the investment management contract plays a central role in determining outcomes for shareholders.
Jon Relleen, Director of Infrastructure & Exchanges – Supervision, Policy & Competition Division at the FCA, said that strong shareholder rights and minimal conflicts of interest are essential to well-functioning markets, including investment trusts. He said the proposals represent targeted, forward-looking changes to the management of conflicts of interest while aiming not to interfere with shareholder voting or engagement. He added that the FCA is seeking views on whether the proposals achieve the right balance.
Alongside the consultation, the FCA has also published examples of good practice designed to help retail investors exercise their voting rights as part of its broader work to encourage effective shareholder engagement. The consultation remains open until 14 August 2026, with the FCA aiming to finalise the rules before the end of the year.