News
Please see below for the response by Peregrine Riviere, Chairman of the IR Society, for his response to HM Treasury regarding the review of the market abuse regime.
Dear Sirs
The Investor Relations Society welcomes the opportunity to comment on the proposals laid out in HM Treasury’s Consultation Paper “FSMA market abuse regime: a review of the sunset clauses”.
The Investor Relations Society (IR Society) represents members working for public companies to develop effective two way communication with the markets and create a level playing field for all investors. It has 600 members drawn both from the UK and overseas, including the majority of the FTSE 100 and much of the FTSE 250.
As such, the IR Society and its members are in many cases responsible for, among other things, the control policies of inside information for their companies. They also have daily to walk the fine line between providing the market with sufficient information to make informed decisions, and ensuring compliance.
Consequently our response focuses on the practical implications of any change, rather than any legal constructions.
Introduction and summary.
The IR Society and its members support completely the principles of transparency and excellence in disclosure as key drivers of a fair and open market. Confidence in the UK markets, and a consequent lower cost of capital, are essential. Damage to that confidence through market abuse should be robustly eliminated. The IR Society and its members therefore support the maintenance of a practical compliance regime, which builds international confidence. Consequently we support HM Treasury’s proposed extension of the Sunset clauses.
Market failures
The IR Society and its members do not believe that any market abuse and consequent market failure arises from the absence of clarity around the existing rules. Rather, the rules provide plenty of opportunity for regulators to take action as necessary. Neither do we believe that the existing regime is unnecessarily complex or costly in compliance.
RINGA
Your consultation paper discusses the additional disclosure burden of “relevant information not generally available”.
There is enough similarity between the practical disclosure obligations arising from the FSA Disclosure and Transparency Rules, to ensure that, even though the UK abuse regime is super equivalent, largely the same disclosures are required.
The IR Society considers that in reality RINGA is very rarely distinct from information that should be discloses under the DTR’s. Investor Relations Officers are skilled at identifying situations where a disclosure is needed, and while they consult externally where needed, are able for the most part to make the correct decisions in house.
We do not believe therefore that additional corporate costs in maintaining the existing super equivalent regime have been imposed, or would arise in the future. Rather, if a changed regime were to be imposed, this would potentially create additional costs as companies got used to new circumstances.
Insiders.
Similarly, the IR Society and its members believe that the existing provisions on insiders are appropriate. Companies are largely effective at maintaining lists of insiders. The fact that the existing misuse of information provision does not require proof of how the relevant inside information was obtained is to be welcomed, as it raises confidence in the markets.
HM Treasury identified options
We agree that there are three practical options, as noted by the Treasury.
The IR Society would support the Treasury preferred position, in a temporary extension until the outcome of the EU review is clear. This will avoid excessive transitional burdens to companies.
Thank you again for the opportunity to comment. As always we are happy to offer any needed clarification.
Yours sincerely,
Peregrine Riviere
Chairman
Published: 9 May, 2008