- Saba wants to replace directors at seven investment trusts with own nominees
- It has stakes in each firm ranging from 19 to 29%
- Needs to win 50% support from voting shareholders to succeed
Scottish Widows and two other investment platforms owned by Lloyds Bank have been accused of a ‘shocking dereliction of duty’ after blocking shareholders from voting on plans to oust the boards of seven London-listed investment trusts.
Saba Capital, run by Wall Street raider Boaz Weinstein, is proposing to replace directors at the seven investment trusts with its own nominees, saying leaders have ‘failed shareholders’ and made poor decisions.
It has stakes in each firm ranging from 19 to 29 per cent and needs to win 50 per cent support from voting shareholders to succeed. As a result, it will win if other investors do not actively vote against the proposals.
Most of the trusts have large numbers of small investors, many of whom hold their shares through investment platforms, and as a result, their turnout is crucial in deciding the outcome.
However, investors who hold shares in the trusts through Scottish Widows, Embark and Stock Trade – all owned by Lloyds – will not be able to vote.
This is because Scottish Widows, which also offers pensions and savings accounts such as Isas, and the other two do not consider the meetings called by Saba to be ‘corporate actions’ and thus do not allow investors to vote on them.
Pushing for change: Saba Capital is run by Wall Street raider Boaz Weinstein (pictured)
‘This is a shocking dereliction of their consumer duty and I cannot see how they consider it to be in line with their obligations to customers,’ said Conservative peer and former pensions minister Baroness Altmann. ‘This is making a mockery of shareholder democracy and corporate governance rules. The regulator should be stepping in urgently.’
James Williams, chairman of The European Smaller Companies Trust, one of the seven being targeted by Saba, said the situation was ‘extremely disappointing’ and that investors should ‘absolutely be able to exercise their right to vote without impediment’.
The stance by the Lloyds-owned firms will exacerbate concerns that investment platforms are not doing enough to inform shareholders of Saba’s plans nor making it easier for them to vote on the proposals.
‘At a time when UK equity markets are in the doldrums, it is astonishing that an opportunity to stimulate shareholder engagement is being blocked for what is clearly a nonsensical reason,’ said Amit Vedhara, director at small shareholder lobbying group ShareSoc.
Last week, the Financial Conduct Authority wrote to the UK’s main investment platforms to ask them how they informed shareholders about voting in the battle between Saba and the trusts. It came after industry body the Association of Investment Companies urged the watchdog to change the rules on how platforms inform investors about plans to change strategy or leadership.
Weinstein suffered a bloody nose last week when investors in the £1.3 billion Herald Investment Trust, the largest firm on Saba’s hitlist, decisively rejected his attempt to kick out the board. Just over 65 per cent of voting shares were against the proposals, with only 34.9 per cent in favour.
Once the shares controlled by Saba were excluded, more than 99 per cent of independent shareholders opposed the proposals. The total turnout amounted to nearly 81 per cent of shares.
But the battle is set to continue on February 3 when two more trusts, Baillie Gifford US Growth and Keystone Positive Change, face similar votes at shareholder meetings.
Both trusts have higher levels of small shareholders than Herald, meaning turnout from investors holding stock through investment platforms is even more important.
A Lloyds spokesman said the bank was looking into the issue and had received a ‘handful’ of enquiries from customers on the matter.
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