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Consultation responses

Our response to CP11/28 FSA and HMT on UK implementation of Amending Directive 2010/73/EU

Jonathan Rees
Market Infrastructure and Policy
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS

7th March 2012

Dear Mr Rees

Investor Relations Society response to CP11/28 Financial Services Authority and HM Treasury on UK implementation of Amending Directive 2010/73/EU

I have pleasure in enclosing The Investor Relations Society’s response to the above consultation. The Investor Relations Society’s mission is to promote best practice in investor relations; to support the professional development of its members; to represent their views to regulatory bodies, the investment community and government; and to act as a forum for issuers and the investment community. The Investor Relations Society represents members working for public companies and consultancies to assist them in the development of effective two way communication with the markets and to create a level playing field for all investors. It has over 600 members drawn both from the UK and overseas, including the majority of the FTSE 100 and much of the FTSE 250.

The implementation of the Prospectus Directive in 2005 with cross EU capital markets passport was a landmark initiative that we feel has been of benefit to issuers and investors. Our members issue prospectuses on an on-going basis inviting offers for share capital or debentures and are bound to the Transparency Directive setting out disclosure requirements once securities are admitted to trading. As the professional body representing investor relations in the UK we regard clarity and openness within corporate communication as of the utmost importance and transparency is at the heart of best practice investor relations. A company’s Board should provide the lead with the IR team acting as a conduit and not as a gatekeeper. The Society supports the current disclosure and transparency regime and is a rigorous upholder of the principles of universal, proactive and prompt dissemination of information to shareholders.

Where the opportunity arises to improve upon this and align these directives with existing regulation in the interests of the end participant (be it issuer or investor - naturally we are issuer-focussed in our consultation responses) we support this, while reserving the right to question elements we consider superfluous or counterproductive. For example we voice concerns that the amending directive proposal to notify ESMA following prospectus approval in addition to the host competent authority could cause delay by adding a level of bureaucracy and we note with interest at the time of writing that ESMA has postponed this recommended initiative until further notice. We note some of the amending directive relates to investments on a smaller scale that would typically concern retail rather than institutional investors. Our members are investor relations officers (and their advisors) working for high market capitalisation companies and will typically communicate with institutional investors, hedge funds and sovereign wealth funds in addition to analysts, as well as at times ‘retail’ investors of higher net worth.

Where we feel questions relating to thresholds and issues are not relevant to our members we state this. We also want iterate that the prospectus process is typically handled in large part by investment bankers and in-house treasury. The IR role during the process is to ensure the company message remains consistent and clear by tying together the strands and inputs in such a way as to make the investment case while reducing the cost of attracting new investors both during prospectus and once securities are admitted to trading. We have responded to this consultation accordingly. Our detailed response to your individual questions is attached below. If you have any further maters which you would like to discuss with us please do not hesitate to contact me.

Yours sincerely,

Michael Mitchell
General Manager
The Investor Relations Society
3 Bedford Street
London WC2E 9HD

Published: 7 March, 2012