Mark Hynes - thoughts on corporate disclosure

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

Tuesday, January 10, 2006

Consult: “To seek advice or information of” – your chance to influence future regulation

As we roll into 2006, there are a significant number of consultations from regulators, which will have an equally significant influence on the laws surrounding Investor Relations. In my experience of serving on panels such as CESR, regulators genuinely want input from the coalface. The IRS among others will be responding (see their website for details) but the more direct corporate input the better.

First among these consultations is inevitably OFR and life after the Gordon Brown pronouncement. Policy-watchers believe there is great confusion as to the way forward. Will OFR survive in an almost identical form? (probably yes). Will it become part of the Combined Code and become best practice? (probably not). Meantime investors and advisors are concerned.

Mark Goyder of Tomorrow’s Company for example wrote to the FT concluding …“over the next five years forward-looking statements will become universal around the world. We need rigour in measuring and reporting on the values and behaviours that are essential to the creation of enduring shareholder value. Investors need to have their finger on the pulse of relationships with customers, employees and suppliers. The OFR standard offers a clear, understandable framework for moving into this new generation of reporting. Companies that have already put in the work have told us that the OFR is strengthening their focus on strategy and their selection of the right performance indicators.” Watch this space.

Meanwhile the Transparency Directive is working its way into law. The European Securities Committee is consulting on its proposed language, requiring implementation in member states. This impacts especially the means of dissemination of inside information, and the major shareholdings disclosures (see below). And the FSA is likely to consult on its UK implementation in March.

The Takeover Panel has currently three open consultations including on the implementation of the Takeovers Directive.

One area where issuers may find it useful to respond is in the definition of shareholder interests. This defines what disclosures shareholders – including widespread holders of Contracts for Difference – make. Under 3 different current consultations (Takeovers, Transparency and Company Law Review), there appears to be contention. The Takeover Panel is proposing to include synthetics such CFDs in their disclosure obligations, whereas the FSA and DTI, with their respective implementations of the Company Law Review – replacing 212’s and 198’s – will EX-clude CFD’s. Unless you tell them otherwise.

And finally, consultations are not limited to Europe. An SEC Comment Period has been opened on changes to US regulation, which will liberalise the de-registration process for many foreign private issuers. If passed it would allow foreign issuers to end their reporting obligations under the Exchange Act and remove them from the burdens of the Sarbanes-Oxley Act.
Happy New Year – and Happy Responding to these consultations.

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