Mark Hynes - thoughts on corporate disclosure

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

Tuesday, March 21, 2006

Latest Consultation Paper asks the wrong question?

After 5 years+ of the Financial Services Action Plan, with 39 new Directives, and who knows how many consultations across the European Union, the latest CESR consultation on how to implement the required Central Storage Mechanism closes on March 31st.

The concept is that listed companies would be obliged to post electronic copies of their regulated information – including annual reports, half yearly financial statements, management reports, certain corporate actions, and major shareholdings – into a database, freely accessible by investors.

Despite the fact that these same documents will already have been disseminated across the EU to online locations accessible by both institutional and retail investors, the Transparency Obligations Directive requires each member country to establish an Online Access Mechanism, networked to allow investors across the EU to access company information.

The CESR consultation paper foresees at least 5 ‘network models’ described in detail, together with discussion of formatting, security, etc. It discusses how the national databases could link together, in a way that allows an investor to search across all EU listed companies.

However the question it does not ask is whether this Central Storage Mechanism is whether one is needed in the first place. Having worked in the financial information business for 25 years, I have seen data enterprises succeed – and lots fail. However, those that – eventually, in some form – succeed, do so because users need it.
Given the regulatory burden already on IRO’s, I would have liked to see the question posed – “is this necessary?”.


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