UK/EU - The UK's Investor Relations Society has criticised the European Commission's proposals for more transparent company disclosure as little more than a "charade", despite it being less controversial than originally feared.
The so-called transparency directive looks to strengthening protection for all investors against Enron-style scandals. Under the new rules companies will be required to publish detailed half-yearly financial reports, quarterly net turnovers and both profit and losses (pre-tax/net).
EU Internal Market Commissioner, Frits Bolkestein, said: “This proposals aims to ensure that investment decision are based on sound information about issuers of securities [and debt].... .
“Better informed investment decisions will lead to a better allocation of capital. That will help both listed companies and investors and bring enormous benefits for the European economy as a whole, A true Internal market needs investors to be able to invest across border easily... .”
The directive is also aiming to catch up with the US, where the regulations are more stringent, requiring three full-fledged quarterly reports.
Member states aim to have the directive implemented by 2005 at the latest.
But according to Andrew Hawkins, chief executive of the IRS, the proposals will have little impact on existing UK policy.
Companies will breathe a sigh of relief that the requirements for quarterly reporting are watered down. However, in a sense this makes quarterly reporting even more of a charade than it would have been if companies had been forced to make more formal announcements and doesn't change the fact that investorsdon't want information in this way.
“The UK regulatory regime demands continuous reporting so this adds nothing to the actual efficacy of disclosure.
In addition, an NAPF spokesman said he was not convinced by the proposals.
He stated: “Although we welcome greater disclosure, we are not convinced that quarterly reports give any additional benefits to shareholders or investors.
“There could also be a danger of putting additional administrative burdens on firms at this time, when it is the last thing they need.”
Bolkestein attempted to reassure investors that the requirements would not give rise to short-termism, adding that “there is no evidence that suggest a mixed policy approach will lead to excessive volatility on the stock market.
“Short-termism can provoked by companies who post forecasts with analysts, or promise growth in earnings per share at certain intervals and then modify them later,” he said.
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