Chair of the Edinburgh Worldwide Investment Trust (EWI) Jonathan Simpson-Dent has published an open letter in response to comments from the Financial Conduct Authority (FCA) regarding US hedge fund activists Saba Capital.
In an article published in The Sunday Times recently, the FCA’s interim executive director of markets, Simon Walls, said the investment trust sector could be seen as “self-interested” or “short-sighted” for urging the regulator to take action against minority shareholders having too much control over an investment company.
In response, Simpson-Dent wrote this morning (23 March 2026) that this critique risked “missing the central issue”.
“Here’s the reality under the current legal and regulatory framework: a minority holder can impose a new board – given typically low retail shareholder voting turnouts, a 30% stake can be sufficient to force out and replace an entire board because that change only requires approval from more than 50% of shareholders who actually vote,” he explained. “Investor platforms often do not deem such a move to be a corporate action and therefore do not notify their customers of such a vote.
“Once in situ, the new board has the power to appoint a new manager with a different goal and approach. The new manager could be the firm that has just nominated the new directors through its minority holding.”
EWI and IEM
The comments from both the FCA and EWI come following proposals from Saba earlier this year to replace its board of directors with Saba’s nominees. This has been rejected by other shareholders two times in total.
At the start of the year, shareholders rejected proposals to remove the board by 53.8% of total votes. When Saba’s stake was removed from proceedings however, this amounted to 93% of shareholders rejecting the proposal.
There has been a similar ongoing battle with Impax Environmental Markets (IEM), which is now urging investors to tender their shares to protect themselves against a potential Saba takeover.
Simpson-Dent said: “This self-fulfilling circularity is often in conflict with the objectives of the majority of shareholders. This is why Impax and Edinburgh Worldwide are proposing tender offers to provide shareholders with the opportunity to exit these trusts.
“No one is seeking protection from legitimate shareholder scrutiny. The right to requisition meetings, propose resolutions and vote on board composition is fundamental to the UK’s corporate governance framework and should remain so.
“The real question is whether those rights are operating fairly for all investors, particularly the tens of thousands of retail shareholders who dominate ownership of the investment trust sector.”
Also in The Sunday Times article, Walls said investment companies “already have sufficient tools to deal with repeated shareholder acquisitions”, such as through changing articles of association, or turning to the courts to assist with a resolution if the case is deemed to be “vexatious”.
However, Simpson-Dent said “neither approach offers meaningful protection”, given his own board, as well as that of Impax Environmental Markets, has “explored all such options”.
“Amending a company’s articles requires approval from at least 75% of votes cast. While this threshold is [rightly] designed to protect shareholders, in practice it means a determined minority investor holding a significant stake can block any amendments,” he warned.
“The legal bar for resolutions to be considered ‘vexatious’ is extremely high. Courts are, quite rightly, reluctant to restrict the ability of shareholders to propose resolutions. However, this leaves companies vulnerable to sustained campaigns from activists.
“A third requisition at Edinburgh Worldwide, launched just weeks after shareholders had rejected an identical proposal, could not be prevented from proceeding.”
The chair therefore said there is a “structural vulnerability” at play within the sector, given that while retail investors own roughly half of EWI’s shares, for instance, voting turnout is typically lower than that of institutional investors. He warned this imbalance can therefore be exploited in the personal interests of a minority shareholder.
“Shareholders may therefore be left to rely on intervention or challenge after the event, by which point the vehicle may already have undergone significant disruption.”
Three steps for protection
Simpson-Dent believes there are three steps the FCA should implement to protect the interests of “all shareholders”.
First, to improve consistency of how shareholders are notified of votes coming up. Second, for shareholders to be given “clear and consistent information” about minority shareholders seeking to take over the company. He argued that, in EWI’s case, Saba “did not engage with shareholders and did not attend the meetings at which they were proposed for office”.
Finally, the chair urged the FCA to provide “clearer definitions and stronger safeguards around board independence” in its regulatory framework, as well as conflicts of interest, “to prevent outcomes that undermine the spirit of shareholder democracy”.
“These are not arguments against activism. They are arguments for transparency, fairness and for a regulatory framework that protects all investors, not just the most powerful. That is by no means either short-sighted or self-serving,” Simpson-Dent said.
“Retail investors deserve a system that works for them, as well as for the most powerful shareholders. I therefore welcome the FCA’s consultation later this year, though for the shareholders of Edinburgh Worldwide, any changes will come too late.”
Matthew Read, senior analyst at QuotedData, said he agrees with the FCA’s Walls that the regulator should not pick sides in a dispute with an activist. However, he argued that “this is not what is being asked” of them.
“Saba’s actions across multiple funds have exposed a clear gap in the regulatory framework: smaller shareholders are at a disadvantage to large institutional holders in terms of voting power, enabling an activist to return repeatedly with the same resolutions, imposing costs on all shareholders,” he explained.
“This issue needs to be addressed. Where existing rules offer inadequate protection, the FCA should recognise this and consider how best to close the gap. While, in theory, Walls’s suggestion that trusts can turn to the courts if repeated votes are “vexatious” has merit, in practice it is not a workable solution given the time and complexity involved.
“Trusts such as Herald, Impax Environmental Markets and Edinburgh Worldwide have clearly explored all options and rejected this route, instead opting for extreme measures to protect shareholders. In our view, boards should not have been forced into this position; it would be far better to address the underlying problem.”
While Read agreed it would be inappropriate for the FCA to intervene in individual cases, he pointed out the industry is seeking “a structural fix” rather than “case-by-case intervention”.
“The government and the FCA should acknowledge that there are issues and work towards a solution that is fair to all. It is just unfortunate that it has taken the loss of some unique investment vehicles to bring the problem into focus,” he said.
The FCA has been approached for comment.
