Corporate law update: 27 June - 3 July - Macfarlanes

FCA consults on listing rules changes for closed-ended funds

The Financial Conduct Authority (FCA) is consulting on changes to the UK Listing Rules (UKLR) that apply to closed-ended funds.

A closed-ended investment fund (often referred to as an “investment trust”) is a form of company that pursues a specific investment strategy, with its assets managed by an investment manager. Closed-ended funds differ from open-ended funds in several respects, including that shareholders do not have a general right to redeem their shares and withdraw their capital.

The proposed changes are set out in Consultation Paper CP26/21. In short, the FCA is proposing to make three principal modifications to the current regime:

Board independence . Extending the existing rules that require the fund’s board to be independent of its existing investment manager to cover proposed investment managers. Specifically, directors who are not independent of a proposed new investment manager would not be permitted to participate in board discussions, or vote on board resolutions, relating to that proposed new manager’s appointment.

Substantial shareholders . Deeming a director who is appointed by a substantial shareholder (or one of its associates) not to be independent of that shareholder (and its associates). The effect would be that the director would not be able to participate in votes on substantial transactions with that shareholder.

Investment manager fees . Extending existing protections around existing investment managers’ fees to fees payable to proposed investment managers. Broadly speaking, if the fees to be paid to a proposed new investment manager were to exceed 0.25% in one of the UKLR class tests, the transaction would need to be announced and the fund’s sponsor would need to give a “fair and reasonable” opinion. If they were to exceed 5% (which would be unusual), the appointment would also require the approval of the fund’s shareholders.

Changes to investment strategies. Under the UKLR, any material changes to a fund’s investment strategy must be approved by both the FCA and the fund’s shareholders. Under the proposed changes, a substantial shareholder of a fund who is also an investment manager to that fund would be excluded from voting on material changes to the fund’s investment strategy.

The consultation closes on 14 August 2026. The FCA aims to publish its subsequent policy statement and final amended rules by the end of 2026.

Read the FCA’s consultation on changes to the UK Listing Rules for closed-ended funds (opens PDF)