FCA proposes conflict-of-interest rules for London investment trusts and sets out retail customer engagement expectations for stockbrokers and trading platforms
The Financial Conduct Authority (FCA) published two separate regulatory proposals on Friday targeting the London Stock Exchange-listed investment trust sector and the retail investment platform market. On investment trusts, the FCA proposed rule changes that would manage conflicts of interest in situations where a substantial shareholder of a listed investment trust seeks to become a director while holding a financial interest in the trust — a scenario that can arise when large shareholders seek board representation to influence strategy. On retail customer engagement, the FCA set out its expectations for how stockbrokers, investment platforms, and trading apps should interact with retail customers, including enabling them to exercise shareholder voting rights. The retail engagement guidance targets the growing population of retail investors using digital platforms, where the FCA has expressed concern that customers are not routinely offered the ability to vote on corporate resolutions as shareholders. The two publications reflect the FCA's continuing focus on consumer duty — the regulator's overarching framework requiring firms to deliver good outcomes for retail customers — and on governance standards in the listed investment company sector, which has faced scrutiny over board composition and fee structures in recent years.
Why this matters
The investment trust conflict-of-interest proposal is a targeted piece of governance regulation that will require listed investment companies and their substantial shareholders to review board appointment processes and disclosure obligations. The retail engagement expectations, meanwhile, sit squarely within the FCA's Consumer Duty framework and will require platforms to assess whether their current shareholder communication and voting infrastructure is compliant. Both publications are likely to generate compliance gap analysis work and, in the case of the investment trust rules, may require amendments to existing shareholder agreements and board appointment protocols. The 'why now' is the FCA's sustained post-Consumer Duty push to improve outcomes across retail investment markets, combined with specific concerns about governance in the closed-ended fund sector.
On the Ground
On an FCA compliance engagement of this type, a trainee would assist with drafting a compliance gap analysis memo comparing the new FCA expectations against a platform's or investment trust's existing policies, and help prepare a regulatory notification summarising the firm's proposed response and implementation timeline.
Interview prep
Question you might get
“A substantial shareholder in a London-listed investment trust wants to nominate themselves as a director. What conflict-of-interest issues does this raise under the FCA's proposed rules, and how would you advise the trust's board?”
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