Mark Hynes - thoughts on corporate disclosure

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

Thursday, April 10, 2008

Australia – first out of the box with CfD/ derivative disclosures?

CfD’s and other equity derivatives are guaranteed to excite interest among IR professionals. And this blog has tried to capture that interest by reporting on various regulators’ progress in requiring transparency of the underlying beneficial owner of the CfD.

With the FSA consultation closed – and corporates keenly waiting for the result – it was encouraging to see a new front runner entering the race. In a speech to the CBI last week which laid out a "Vision for a Modern Australia", Australian Prime Minister Kevin Rudd – in discussing the financial markets – announced new regulations on derivatives such as Contracts for Difference.

He noted that both the UK and Australian markets for Contracts for Difference have grown significantly in recent years, with as much as 30% of companies’ capital being owned in this form.

However, as we know, these equity derivatives have enabled market participants, including speculators and hedge funds, to avoid the disclosure requirements associated with direct stakes. This has caused concerns in both UK and Australian investment (and corporate) communities, about lack of transparency on who owns – and controls – companies shares.

So companies in the UK will be heartened to hear Mr Rudd remarks.

“Today I can announce that Australia intends to take a lead in increasing the transparency of its financial markets in this important area.

I know that the Financial Services Authority here in the UK has recently been working on this area, and we are keen to ensure that the lines of communication between our agencies are open. I have asked the Australian Treasury to review appropriate disclosure requirements for equity derivatives.”

So, as the FSA mulls the responses to their consultation, it looks as if they have at least one ally that favours more transparency. Potentially good news for IR professionals.


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