Hedge fund calls on the Bank of England to remove the chairman of the London Stock Exchange

man with an umbrella in front of the lse

One of the London Stock Exchange's top investors has urged the Governor of the Bank of England to step in and remove the exchange's chairman, in a significant escalation of one of the most bitter City spats in recent memory. 

Sir Christopher Hohn has written the latest of a series of open letters to Donald Brydon, the chairman of the LSE, in which he has warned him to not "undertake a character assassination" of the exchange's chief executive Xavier Rolet, arguing this will make it harder to hire future executives. 

Sir Christopher, whose The Children's Investment Fund owns 5pc of the exchange, is convinced that the Frenchman has been forced out against his will and made to sign a gagging order. Recent reports have suggested that the LSE directors are compiling a dossier on Mr Rolet that highlights his hard-pressing management style and justifies their decision. 

The letter from TCI argues the LSE is now in the grip of a "corporate governance crisis" and that "the Bank of England and the FCA both need to immediately intervene to instruct the board to appoint a new chairman".

It is almost unprecedented for a hedge fund to invoke the Bank in this way. It also harks back to a bygone era in which it was said that "one twitch of the Governor's eyebow" was enough to censure inappropriate City behaviour. This will not be lost on Mr Brydon, a City grandee of many decades standing.

Sir Christopher wrote: "It appears to us that Xavier Rolet is being improperly threatened by the board with severe reputational damage unless he immediately steps down or publicly confirms that he does not want to remain as CEO."

Sir Chris Hohn, the founder of The Children's Investment Fund (TCI), which owns 5pc of the exchange, has been on a vicious campaign to push out the LSE's chairman and keep outgoing chief executive Xavier Rolet in the role after claiming he was forced out. 
Sir Chris Hohn, the founder of The Children's Investment Fund, has been on a vicious campaign to push out the LSE's chairman and keep outgoing chief executive Xavier Rolet in the role after claiming he was forced out. 

The letter, dated November 21, argued that the relationship between the LSE's chairman and chief executive has "deteriorated to such an extent that it is impossible for you both to have an effective working relationship". Sir Christopher called for an extraordinary general meeting (EGM) earlier this month in order to get to the bottom of Mr Rolet's departure. 

The LSE responded to the latest letter by noting that the TCI had triggered the EGM and started a "process which we are now adhering to". 

A spokesman said: "The next step in that process is to issue a circular, in order that all shareholders have the same amount of information at the same time. As regards regulatory oversight, we have kept regulators abreast of developments throughout."  

The Financial Conduct Authority and the Bank of England declined to comment on the letter.

It was announced in October that Mr Rolet was stepping down late next year after almost a decade at the helm, news that at the time was not seen as a huge shock given he had planned to retire if the LSE's £24bn merger with German exchange Deutsche Boerse had not been blocked for competition reasons.  

However, Sir Christopher raised the alarm bell earlier this month by publicly claiming that Mr Rolet was pushed out. It has triggered one of the most intense bust-ups seen in the City for years, with top ten investor Egerton Capital also calling on the chief executive to stay put. 

Sir Christopher wants Mr Rolet to stay in the role until 2021 rather than leave next year, and has got become irate at the lack of answers over his apparent dismissal. 

Mr Rolet told The Sunday Telegraph in June that he "cannot imagine any sort of challenge that would compare to this one" but admitted he did not know what the future held. He has boosted the group’s market capitalisation from £800m when he joined in May 2009 to almost £14bn today. 
Mr Rolet told The Sunday Telegraph in June that he "cannot imagine any sort of challenge that would compare to this one" but admitted he did not know what the future held. 

Mr Rolet told The Sunday Telegraph in June that he "cannot imagine any sort of challenge that would compare to this one" but admitted he did not know what the future held. He has boosted the group’s market capitalisation from £800m when he joined in May 2009 to almost £14bn today. 

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