U.K. regulator warns companies against selective disclosure

Howard Davies, chairman of the FSA, today warned that selective disclosure to City analysts and the media will not be tolerated in London’s markets. Speaking at a business lunch, Davies reaffirmed the FSA’s commitment to enforce long standing rules that prevent selective leaking or briefing by listed companies.

Under the FSA rules, price sensitive information which could significantly affect a company’s share price must be announced to the market as a whole without delay. “In fast moving equity markets the timely flow of accurate information to investors is crucial. It is especially important in present circumstances given the large number of new small investors who have been attracted into equity markets in the last couple of years. This is a very welcome trend. But it could be set back if small investors believe that they are not allowed access to information on a similar basis to large institutions,” Davies said.

The U.K. announcement comes just after the U.S. Securities and Exchange Commission brought into effect Regulation FD, which is meant to end the process of selective disclosure, too.

Davies went to say, “There is nothing more corrosive of market confidence than the feeling that some investors are deliberately excluded from an inner circle of privileged counterparties. And in addition to the positive benefits of a well-informed market, a rule of this kind helps reduce the scope for insider dealing, by getting price sensitive information quickly into the public domain.”

The rules against selective disclosure, set out in the FSA’s U.K. Listing Authority’s Listing Rules, gives practical guidance on what can be, and what should not be, covered in private briefings by companies. “This guidance is well understood by most companies, in our experience. Some have gone further and given investors access to their briefings or summarized the content of a briefing in an announcement. In our view, this is a welcome development, which others should consider emulating,” said Davies.