Activists get green light to form groups

CITY watchdog the Financial Services Authority (FSA) yesterday threw its weight behind shareholder activism, saying investors can form groups to oust a company&rsquo;s board or force it to revamp its strategy without breaching regulations.<br /><br />The FSA has said the push for activist alliances proposed in Sir David Walker&rsquo;s recent banking review, designed to encourage stronger corporate governance, is allowed within its rules and those of the European Union.<br /><br />But the regulator cautioned that group activism must be based on individual issues, rather than investors always grouping to support each other regardless of the issue under debate.<br /><br />Activists often form groups when rows develop over the future of companies, and often this leads to entire boards being sacked from firms and their assets being sold off.<br /><br />The Association of British Insurers&rsquo; investment affairs director Peter Montagnon described the FSA&rsquo;s statement of support for activist groups as a &ldquo;positive move&rdquo;.<br /><br />&ldquo;Clarifying the rules around shareholder dialogue will make it easier for investors to take a collective approach to boards, when individual approaches have failed,&rdquo; he said. &ldquo;This is an important part of ensuring that shareholder engagement is more effective following the banking crisis.&rdquo;<br /><br />The FSA issued the activism statement after the Institutional Shareholders&rsquo; Committee asked for clarity, believing Walker&rsquo;s Review could be at odds with existing rules.