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Activist investor The Children’s Investment Fund has called for the UK financial regulators to intervene at the London Stock Exchange Group by appointing a new chairman to end its corporate governance crisis.
The LSE has come under fire from TCI, which holds a 5 per cent stake, since it announced last month that chief executive Xavier Rolet would step down next year.
The investor has grown frustrated that Mr Rolet has been unable to explain the reasons for his planned departure and accused the LSE board of gagging the chief executive with confidentiality clauses. It has called an extraordinary shareholder meeting to vote on removing the chairman, Donald Brydon, and extending Mr Rolet’s contract until 2021.
In a letter to Mr Brydon on Tuesday, Sir Christopher said Mr Rolet was “being improperly threatened by the board with severe reputational damage unless he immediately steps down as CEO . . . or publicly confirms that he does not want to remain.”
Investors are waiting for a forthcoming circular from the LSE, which will set out the reasons why the exchange began a search in October for Mr Rolet’s successor. Sir Christopher said it would be inappropriate for the board to “undertake a character assassination” of Mr Rolet in the circular.
“In requisitioning the EGM, TCI triggered a process which we are now adhering to,” the LSE said in a statement. “As regards regulatory oversight, we have kept regulators abreast of developments throughout,” it added.
Sir Christopher added that it was now impossible for Mr Brydon and Mr Rolet to have an effective working relationship.
“The situation cannot wait for several weeks until the general meeting.
“It seems to us that the Bank of England and the Financial Conduct Authority both need to immediately intervene to instruct the board to appoint a new chairman.”
The FCA said it did not comment on any developments at the LSE. Sir Christopher, one of Mr Rolet’s biggest supporters, has been backed by another investor, Egerton Capital.
During Mr Rolet’s eight-year tenure the LSE’s share price — adjusted for rights issues — has risen by around 500 per cent to more than £38. That has turned the exchange into a £14bn trading, data and clearing exchange.
The LSE board has not commented on the reasons for Mr Rolet’s departure and last week cancelled a meeting between the board and TCI intended to diffuse the tensions. The LSE said it had a duty to present all the necessary facts to shareholders in a forthcoming circular.
Other large shareholders, including BlackRock, the Qatar Investment Authority, Invesco and Veritas Asset Management, are likely to play key roles in the debate. The circular is due to be published, along with the date for the shareholder meeting, in the next two weeks.