Mark Hynes - thoughts on corporate disclosure

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

Thursday, July 15, 2010

If regulation is the bane of an IRO’s life, here’s our chance to have a say.

There are currently 4 open consultations which will potentially impact those of us in the IR profession. Time to say what we think! The IR Society Policy Committee is drafting responses right now, and would love to hear from you.

First, from Europe, a review of the Market Abuse Directive. Much of it seems to be about the regulators themselves, but there is a question around market manipulation, and whether the Directive should be extended to cover it. Isn’t already covered, you ask? In the UK, yes it is, as we have a gold plated regime, but its not part of MAD. Should it be? See here.

Also from the Commission, a review of the Transparency Obligations Directive. (23/8) This follows a review of the effectiveness of TOD. 2 key issues arising:
• Should there be a “lesser” disclosure regime for smaller companies? (The thought is that reducing compliance costs – eg no IMS – would encourage more companies to list in EU). A key challenge of course is defining a smaller company. Market cap? Companies below say 60% of total exchange’s market cap?
• A ‘maximum’ harmonisation regime for major shareholder notifications– ie standardisation on 3%, and inclusion of derivatives. Potentially EU-wide disclosures around short selling and stock lending. Many want to argue for a ‘Section 793 for Europe’.
More here.

The Takeover Panel. This consultation has been widely trailed politically, along the “should we protect British companies like the French do” argument. However there are a number of IR-focussed issues raised by the takeover of Cadbury by Kraft in the first quarter of 2010. These include:
• the suggestion of the “50% plus one” minimum acceptance condition
• whether voting rights should be withheld from shares in an offeree company acquired during the course of an offer
• the suggestion that the 1% trigger threshold for the disclosure of dealings and positions in relevant securities under the disclosure regime in Rule 8 should be reduced to 0.5%. (By the way, related to this, one potential impact of the TOD review would mean the removal of some Rule 8’s, as being ‘gold plating’)
• offerors should be required to disclose more about how a bid would be financed.

Go here for more.

Institutional Shareholders Committee Rights Issues Fees Inquiry. (6/8). This consultation focusses on the demand and fees for investment banking services by listed companies. Issues the ISC raises include: How much control do listed companies have over the structure of the deal, including decisions as to full scale rights issue, clawback issue or firm placing, discount, fees? How much corporate decision-making takes place at full board level? How much risk have investment banks had taken? How have concerns over confidentiality affected consideration of other options, use other advisers or engage in dialogue with shareholders? And - probably most contentiously - how much value was added by banks, brokers, financial advisers?
More can be found here.

Happy responding!


  • At 9:18 am, Anonymous Stefan Pettersson said…

    Thanks for posting this. I would also add a global inquiry into what changes are needed to make corporate reporting "fit for purpose":


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