UK investment trusts are pushing the Financial Conduct Authority to tighten rules that would limit activist investors' ability to gain control of closed-ended funds. The Association of Investment Companies argues current regulations allow conflicts of interest when large shareholders vote on proposals to appoint themselves as asset managers. This regulatory push comes amid a high-stakes battle for Edinburgh Worldwide Investment Trust.

The controversy centers on US activist investor Boaz Weinstein's Saba Capital, which is seeking to replace the board of the FTSE 250 trust and take over management from Baillie Gifford. The dispute has gained urgency due to EWIT's significant stake in SpaceX, Elon Musk's rocket company expected to launch one of the world's largest IPOs. The AIC contends that existing related-party rules fail to prevent self-dealing by activist investors.

While the FCA has announced plans to review listing rules for investment companies, including board independence provisions, executives have cautioned against suppressing shareholder activism. The regulator's markets director warned that such calls appear "short-sighted" and "self-interested." AIC CEO Richard Stone maintains that amendments are needed to ensure shareholder activism remains constructive rather than a path to enrichment at other shareholders' expense.