The Financial Conduct Authority (FCA) has announced plans to introduce stricter regulations for investment trusts in response to concerns over conflicts of interest involving significant shareholders. The proposed changes come after criticism that the watchdog did not act swiftly enough to prevent a US hedge fund from gaining influence over several London-listed trusts.

Saba Capital Management, a hedge fund led by New York financier Boaz Weinstein, has targeted multiple UK-listed investment trusts over the past year. Among those affected are Impax Environmental Markets Trust and Edinburgh Worldwide Investment Trust, whose management teams have publicly criticized the FCA following Saba’s apparent takeover efforts. The hedge fund’s actions have raised alarms about the potential for large shareholders to leverage board control for their own benefit, potentially at the expense of other investors.

In response, the FCA announced a plan to amend rules that currently allow significant shareholders to vote on proposals aimed at nominating themselves as asset managers for the trusts. Under the new proposals, such shareholders would be barred from casting votes on these matters to reduce conflicts of interest and protect the integrity of trust governance.

Richard Stone, representing the Association of Investment Companies, which advocates for investment trusts, said the regulator’s plans address a regulatory gap that permitted shareholders to acquire board control and pursue self-serving agendas. The association welcomed the FCA’s move as a necessary step toward safeguarding the interests of all trust investors and preserving proper oversight within the sector.

The FCA’s proposals mark the latest effort by the City regulator to strengthen governance standards across financial markets and enhance investor protections. Consultation on the new rules is expected to follow before any formal changes are implemented.