Public companies to be brought ‘back in line’
Guardian Business Editor
Published: Sep 27, 2013
Financial regulators have agreed that they must clamp down on publicly-listed companies that are all too often neglecting to disclose critical and legally-required information to the investing public, with one top regulator admitting they have “failed” to date in not penalizing non-compliant companies.
Yesterday, Interim Chairman of the Securities Commission of The Bahamas Hillary Deveaux said that regulators have to date been “too lax” in allowing companies listed on the Bahamas International Securities Exchange (BISX) that have certain requirements to disclose “material information” about their operations to get away with not doing so.
Material information is generally taken to mean any information about a company which could have at least a small impact on its share price, and which, by one individual knowing the information before another, could give them a trading advantage.
BISX Chief Executive Officer Keith Davies agreed, calling the issue an “ongoing challenge” which notwithstanding the difficulty involved in affecting change in this area, needs to be addressed.
Their comments came at a Charted Financial Analyst (CFA) Society luncheon at which Davies spoke on the subject of “Building an essential, dynamic financial marketplace for Bahamian investors and corporations”.
Making his comments on challenges regarding disclosure among public companies in the question and answer period after Davies’ presentation, Deveaux suggested it may be the case that some listed companies are even unaware of what constitutes “material information” and therefore what they should be disclosing to investors or potential investors under the Securities Industry Act.
“I think that has been one of the major challenges for the regulators in this jurisdiction (by which) I mean BISX and the SCB. That’s where the education process has to start. We have to educate the listing companies, our public companies, of their obligations in law. We see so many misgivings in that area.
“In this jurisdiction, we have failed to some extent because we have not followed through. Something coming to the commission, something going to BISX, you know there’s going to be action taken at these AGMs, you know that some of those actions are going to be material changes. If you don’t see (public companies) coming and informing BISX or the commission in a timely fashion and you don’t see the notice going out in the media, then you know they have contravened the provisions in the act.
“And we should get on the phone, or find a way to bring them back in line.
“I think that’s something we have been to some extent lax in dealing with, and it’s something we’re going to have to tighten up on,” said Deveaux, who came back as interim chairman of the SCB earlier this month following the departure of Dave Smith.
Alluding to earlier comments made by Davies regarding the need to ensure investor education as a means of stimulating greater liquidity in the stock exchange, Deveaux suggested that company education is just as important.
“You have companies who send their proxy material to the commission and to BISX at the same time that they send it out to their shareholders. So the commission knows exactly what’s being proposed in those meetings, unless something extraordinary happens at the meeting. The board understands that once these issues are dealt with, they direct the management to do what’s necessary, but in most cases these material changes are not posted as a public notice in the media.
“I think the management believes that once it gets to the shareholders meeting it’s basically informing the public, but it’s not. They have an obligation to inform the public – the total investing public – because you don’t want a situation where you could take advantage because of lack of knowledge,” he said.
Responding to Deveaux, Davies suggested that part of the challenge involved in regulating revolves around BISX’s “dual role” as both a regulator and a promoter of the market.
“I have to go to that company and try to sell the exchange, and say ‘Hey, come along, we can do this, we can do that...’, the day after that we’re talking about educational issues, and the day after that I’m threatening the entire board to say if they don’t make certain disclosures, there’s going to be regulatory action; so it’s a dual role but it’s a role that the companies understand and the very basis of understanding is that if we don’t do this properly, the confidence that people have in the market place is going to be eroded.
“We get some resistance from companies, but we try to apply it consistently across the board in terms of what is required of them.”