Investors attack ‘confusing’ EU takeover rules that still apply to the City

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Investment heavyweights have criticised “confusing” EU takeover rules that continue to apply to the City.

Baillie Gifford, Blackrock and Aviva are among those backing calls for Brussels’ regulations to be changed by the Financial Conduct Authority now that Britain has left the European Union.

Their complaint is that Market Abuse Regulations, introduced in 2016, have blurred the lines of what they can and cannot do during a corporate takeover.

In particular, City heavyweights fear discussing their views with each other about specific companies.

Andy Griffiths, executive director of the Investor Forum, said that the rules had made matters “confusing”.

“Investors are very cautious about, they don’t want non-public information and they don’t want to be caught acting in concert,” he said. “They are much less comfortable talking to each other about their concerns that they have with companies.”

Rules were relaxed following the 2008 financial crisis following criticism from Labour that institutional investors failed to predict the credit crunch.

City referee, the Takeover Panel, issued a statement that “gave comfort about what they could do together”, Mr Griffiths said. This was then overruled by the Market Abuse Regulations nearly six years ago.

There were more than 20 take-private bids last year, Mr Griffiths said. 

“We have investors [speaking to the press] saying: ‘Look, we have a problem with this price; we have a problem with the terms of this deal.’ But that’s all they could do. They could articulate that publicly, but they couldn’t talk to each other about what they want to see done differently.

“So the FCA could provide the same kind of clarity that the Takeover Panel provided in 2009.”

Mr Giffiths called on changes to Market Abuse Regulations to be included in the Government’s UK listings reforms chaired by Lord Hill.

The Investor Forum ranks as one of the most influential groups in the Square Mile. 

It has 56 members, which also include the likes of Fidelity, Columbia Threadneedle and M&G, which have about £800bn invested in listed UK companies – equivalent to roughly a third of the market capitalisation of the FTSE All-Share index.

Typically choosing to operate behind closed doors, the Investor Forum made headlines in 2018 by spearheading opposition to Unilever’s plans to move its headquarters to the Netherlands.

In September it co-ordinated a meeting between GlaxoSmithKline and its investors in which the pharmaceutical giant’s chairman defended his support for the chief executive, Dame Emma Walmsley, despite opposition from Wall Street activist Elliott.

Michael McLintock, Investor Forum chairman added: “The pressure for engagement between quoted companies and shareholders continues to increase. The Investor Forum exists to facilitate proper engagement between shareholders and companies – in other words, to focus on material strategic and governance issues of concern to both parties, and to do so within a long term, constructive and discreet framework.”

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