Mark Hynes - thoughts on corporate disclosure

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

Wednesday, March 26, 2008

Convergence: ending the differences between US and EU IR?

A consistent theme of this blog has been the wide variation of regulation between countries where a company may be listed or registered. This in turn places burdens on the IR professional, making the compliance task ever more difficult. Last week, we talked about the variations between EU regimes.

And this week, the SEC has taken another step towards creating a coherent regime of regulation, consistent with those of other countries. In doing so, it recognises a changing international environment.

The trading environment is unrecognisable from only 5 years ago, with exchange mergers, the use of derivatives on a cross border basis, and the rise and rise of dark pools of liquidity, from the development of new forms of trading venues such as ATSs, ECNs and MTFs.

At the same time, global markets and this increased cross-border access offer benefits for investors, including more investment choice, cheaper trading, faster settlement and wider access to decision making information.

However to leverage this new world requires regulators to ensure greater international cooperation in creating consistent and strengthened investor protection, and easing the burden of compliance.

Historically, responsibility for oversight – whether by a stock exchange or a securities regulator - has been achieved on a national basis.

So to this week’s announcement by the SEC that they will seek mutual recognition for their regulatory regimes in other countries. The Commission says it aims to explore agreements with their foreign regulatory counterparts, notably the EU, and to create a formal process for common rule making.

And perhaps most interesting is the prospect of reform to the rule governing the process by which U.S. investors have access to foreign broker-dealers. (Think of those “not for US investors” messages).

A final thought. The practice of investor relations in the US is markedly different than that of Europe, with much greater focus on compliance, less engagement by the IRO in corporate actions, and greater retail investor interaction. Will a regulatory platform based around common principles of compliance with things like disclosure, change this distinction?


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