Launch of the Australasian Investor Relations Association
ASIC Chairman David Knott's speech at the launch of the Australiasian Investor Relations Association, 13 August 2001.
Ladies and Gentlemen, I am delighted to be officially launching the Australasian Investor Relations Association this afternoon.
There is a saying that 'timing is everything'.
It seems especially appropriate that I am launching AIRA at a time when protocols surrounding investor/market interactions are being scrutinised around the world. There is additional poignancy, in a timing sense, that I should be doing so in this splendid Boardroom.
AIRA's stated mission is to 'advance the awareness of, and best practice in, investor relations in Australasia and thereby improve the relationship between listed entities and the investment community.' There is much captured within that mission that requires elaboration before it can be embraced as sufficiently expansive and inclusive. The words are capable of being interpreted in a narrow sense – one which is primarily targeted to the interests of wholesale market participants, which has long been familiar ground for investor relations professionals.
Much comfort is therefore gained by reading AIRA's very recent publication Best Practice Guidelines for Communication between Listed Entities and the Investment Community. It becomes clear that the mission statement's reference to investment community is wide ranging and inclusive and that, indeed, a key focus of the Association's work is directed to the interests of retail investors.
It is also clear that AIRA is alive to the damaging impact that asymmetric information can have on retail investor confidence in the integrity of our markets. The maintenance of such confidence and the encouragement of direct retail investor participation in traded markets has long been considered a matter of national interest. All of a sudden it has become a reality, with opportunity fuelled by privatisation of national enterprise, the availability of technology, increased reliance of self funded retirement, the emergence of multiple distribution channels and the (at least partial) demystification of traditional intermediation.
Australia was one of the first countries in the world to prepare itself for direct retail market participation. We recognised that unless investors had confidence that the market was informed and that there was equal access to price sensitive information, we could not hope to attract and retain investor support for our markets. In the early 1990s we engaged in a vigorous debate about the preferred nature of corporate reporting – whether it should be quarterly or continuous – and we introduced laws which were far in advance of the USA and UK at that time, and have only very recently been matched.
We substantially beefed up our insider trading laws as a further demonstration of a national commitment to a market in which investors can trade on equal terms and with confidence in transaction transparency. I believe that taken overall there is much to be proud of in the way we have tackled these issues.
Yet despite all this, there remains a reasonably widespread community perception that wholesale market participants are advantaged over retail participants in access to information and trading opportunity. There is also disquiet that the 'continuous' character of continuous disclosure is overly discretionary in its applied form. Some of this sentiment is probably unwarranted, but regrettably it has been reinforced far more often than we would like by practices which are at best careless and at worst intentionally manipulative. Selective briefing of analysts in an attempt to manage profit expectations is just one of the manifestations of such practice – and it is the selective nature of the practice which generates public cynicism and distrust.
Over the past 12 months ASIC has had to intervene on issues of disclosure far too often. Some of this is attributable to the decline in fortune of the new economy sector and has involved companies which lack an adequate understanding of governance frameworks. In fact we are releasing details today of nine recent interventions requiring provision of additional information by listed new economy companies which followed from our review of the latest round of quarterly cash flow statements.
I wish I could confine my criticism to this sector of the market, but I cannot. There continue to be instances of unacceptable information leakage, and late or inadequate disclosure, from companies of substance and experience which are inexcusable in light of the publicity and exposure directed to these issues over the past 18 months.