FCA must curb the City chancers and carpetbaggers: RUTH SUNDERLAND

Artificial intelligence is making rapid advances into journalism, but there is no substitute for intelligence of the human kind when it comes to a campaign.

This is certainly the case in the City, which is infested with opportunists and chancers.

The Financial Conduct Authority (FCA) is often an inert and defensive watchdog. If it were not for watchful reporters, life would be a good deal worse for small investors and consumers.

One such character was Mark Hartigan, the former boss of LV who tried to sell the mutual insurer to US private equity barons at Bain Capital in 2021.

At the time, we were told the deal was necessary because LV lacked the capital to continue as an independent.

Now, having been saved thanks to a campaign by the Daily Mail, LV has just announced it will be distributing £100m in bonuses to its members, its biggest payout ever. They would never have received this had the Daily Mail not intervened.

A victory such as that shows it is possible to beat the carpetbaggers, but we do need regulators with the interests of small investors and consumers at heart.

Unfortunately, this does not appear to be the case in the FCA’s approach to the assault on investment trusts by US raider Boaz Weinstein.

His Saba Capital has targeted a string of trusts – some, but not all, of which have performed poorly and whose shares trade at a discount to net asset value.

Despite being rebuffed multiple times by non-Saba shareholders, he has persisted in siege warfare against his targets. Trust boards have concluded that he will wear down resistance and that they need to try to help small shareholders who do not wish to keep their money in a Weinstein-controlled vehicle to make an exit.

At three trusts, Edinburgh Worldwide, Impax Environmental Markets and Herald, the boards are trying to do just that.

However, this deprives shareholders of the chance to stay with the trust they chose and may also land them with an unplanned capital gains tax bill.

Particularly so in the case of Herald, which unlike some other Saba targets has been a stellar performer, rewarding an investor who had put money in on inception in 1994 with a 2,904 per cent net asset value total return.

Ironically, given Saba bases its ambushes on big discounts and weak governance, it has a questionable record on both, according to Investec. Analysts there looked into one fund, now known as BRW, after Saba was appointed investment adviser in 2021, and deemed it a ‘cautionary tale’.

Yet the FCA, in the person of interim executive director for markets Simon Walls, appears profoundly unsympathetic to the trusts and their small investors.

The watchdog has launched a review but Walls has made it abundantly clear he is not keen to intervene. At the weekend he threw petrol on the flames in a blog, saying trust boards can already amend their articles of association or take legal action against the likes of Weinstein.

In theory this is correct, but in practice trust boards see it as prohibitive.

Walls gives the impression he cares more about hitting back at the FCA’s critics than he does about the plight of small investors caught up in the mess. That is an unseemly tone for a senior regulator.

At least there is a vociferous media ready to defend private shareholders.

The assault on investment trusts, like the LV affair before it, shows we need campaigning City journalism more than ever.