Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, March 03, 2005

General intro to UK rules

The task facing an Investor relations Officer in the UK in compliance with the regulations is far from easy. The following notes are aimed to help an IRO navigate successfully through the legislation of the UK. So what is the role of the IRO? Go between? Independent? Marketing person? Well no, increasingly it is the IRO who is the decision maker in the final instance. And in the UK they are driven by a series of codes, which lay out their required actions. For example, the Price Sensitive information Guide (about which more later) contains the following:
“Stock markets need a flow of relevant and timely information to function efficiently. Information on listed company’s performance and prospects is of particular importance as this is the basis on which many investment decisions are made; if the information deviates from the generally accepted view of a company’s status it can have a significant effect on the price of its listed securities…Recognising the vital importance of such information the UK Listing Authority requires that the market as a whole, and not just select groups of individuals, has rapid access to it.”
Whereas many countries lay out an encouraging statement similar to this, not all take such a structured mandatory regulatory approach to regulation.

The good news is that by comparison with some other regimes, the UK requirements are a model of clarity. Over recent years, regulators have spent a great deal of time in making the rules as easy to interpret as possible.

The bad news is twofold. Firstly there is an awful lot of it; nearly 3000 pages of regulations exist, which can directly impact the issuer. Secondly, a great deal of it is changing as a result of the EU-inspired plan to create a single European market for financial services.

In some cases these Directives from Brussels are tearing up whole sections of familiar laws, and replacing them with ‘principles’. So the first piece of advice: before acting on any written regulation, especially in the latter part of 2005, and into 2006, check the sell-by date. It could no longer be required/ appropriate.

A great deal of the rules are to do with disclosure. In many instances ‘disclosure’ is the action to be taken to achieve compliance. Many IRO’s – even the most experienced and dedicated – will admit that they do not have perfect recall on all 3000 pages of the regulations affecting disclosure.

What the regulators have done is to create a “slice” through the different regulations, that impacts IRO’s. The

The next set of articles examine the specific regulations, and lays out the key elements that IRO’s should be aware of.


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