Preference shares fiasco prompts FCA to publish 'Dear CEO' letter

Issuers urged to make sure investors are sufficiently informed

Preference shares fiasco prompts FCA to publish 'Dear CEO' letter

Insurance News

By Terry Gangcuangco

The Financial Conduct Authority, which last month stepped in following the ruckus surrounding Aviva and its preference shares, has now reached out to other issuers.

“We recognise that there is a tension between investors’ desire to see a permanent resolution to any remaining concerns and the desire of company boards not to limit their (and their successors’) scope for action,” read the ‘Dear CEO’ letter intended for issuers of listed irredeemable preference shares, as quoted by Reuters. The goal being, to make sure investors are sufficiently informed.

According to the letter, a review by the FCA is being conducted to examine fixed income shares that have a quality of perpetuity or permanence.   

Amid strong criticism from investors, Aviva backpedalled after previously saying it has the ability to cancel its preference shares at par value.

“I am very aware that Aviva is in a position of trust with our customers and investors,” said group chief executive Mark Wilson in a statement in March. “To maintain that trust it is critical that we listen to and act on feedback. The reputation of Aviva, and the trust people have in us, is paramount. Our announcement today means that preference shareholders can rest secure in their holdings.”

 

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