This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Regulation of shareholder action groups following the debacle of the RBS case

Regulation of shareholder action groups following the debacle of the RBS case (see ).

As regards the suggestion that such groups be “regulated”, I do not see how that would necessarily assist to protect the interests of shareholders. Indeed, it might result in even more involvement of lawyers when one of the big problems is that legal firms often set up and run such groups and this is often in their interests rather than the claimants. Introducing regulation would also make it much more difficult to set up and run such groups when time is often of the essence in such matters. Regulation would add even more costs to the expense of running such groups which already prejudices their viability.

If there has been any mismanagement in the RBOS Shareholders Action Group then existing laws can be used to rectify the matter, and as a limited company it can be investigated by the BEIS department if justified. I would need to be convinced that we need more regulation in this area.

I think one issue the Government should look at is the cost of such litigation and the failure of the FCA to take up the cases of both RBS and Lloyds which were both about the issues of prospectuses that were defective. A matter the FCA certainly has the powers to investigate and adjudicate on. Leaving the pursuit of such cases to civil litigation just benefits lawyers and the costs of such cases deters all but the most persistent litigants, thus benefiting the defendants (and in the RBS case the Government had a major financial interest in the company of course and could determine the company’s response via that interest).

We intend to write to Minister David Gauke directly and copy the FCA to try and dissuade him from rushing into more regulation.

Cliff Weight

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