In a letter to the Association of British Insurers, FSA managing director of wholesale Sally Dewar says that the FSA “strongly supports” the review’s proposals, which included plans that would encourage fund managers to take a long-term view of any share investments they make.
Last month, a review by Sir David Walker called for managers to have a better attentiveness to the performance of investee companies over a long as well as a short-term horizon. It said: “Those who have significant rights of ownership, which enjoy the very material advantage of limited liability, should see this as complemented by a duty of stewardship.”
The FSA says these plans pose no regulatory problems and will not lead to problems surrounding market abuse or disclosure.
Dewar writes: “We are satisfied that there is no fundamental inconsistency. We do not believe that our regulatory requirements prevent collective engagement by institutional shareholders designed to raise legitimate concerns on particular corporate issues, events or matters of governance with the management of investee companies.
“Ad hoc discussions or understandings of this nature would not, in our view, trigger restrictions imposed by our rules.”
The letter says that the FSA has been in consultation with a number of investment managers, all of which agreed that any long-term strategies adopted by managers could not be conceived as ‘market abuse’.
Investment Management Association chief executive Richard Saunders criticised the proposals in the Walker review when they were published. He said: “We question the recommendation that the FSA should encourage commitment to the Principles of Stewardship as best practice. This is not an appropriate part of the process of FSA authorisation as an investment manager’s duties are to the client.”