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Activist investors get the green light from the FSA

The Financial Services Authority (FSA) has today given the green light for activist investors to work together without the threat of breaking European Union or UK regulations regarding market abuse and acting in concert. The surprise move was announced by the FSA today although there are certain criteria which must be followed to avoid any potential conflict of interests or market abuse claims.

The parties in question will only be allowed to work together for one specific reason, e.g. the ousting of a chief executive or the introduction of a new corporate structure to a company. While short-term arrangements will be perfectly legal among the various activist investors around the world, they are not able to get together on long-term arrangements without being seen to be acting in concert. The FSA also confirmed that parties working together are not allowed to share data which may be price sensitive and again open up the potential for market abuse.

While there is no doubt this is a positive move for UK investors it will be interesting to see how the various changes are put into action and how the FSA responds to any potential conflict of interests or market abuse claims. Like insider dealing, it may be very difficult to clarify whether the various parties have exchanged data or information or indeed whether they are working together. Has the FSA just opened a new can of worms?

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