Originally published in Business Brief, 2011
Tamara Menteshvili, Founding Director and Chief Executive of the Channel Islands Stock Exchange (CISX), concludes her article series by highlighting some of the ongoing obligations on directors of listed companies.
The obligations on a director of a listed company to disclose information and keep the market informed are significant and rely on communicating data both effectively and at the right time. It applies whether it is a listing on a stock exchange where there are detailed listing and trading rules such as on the CISX or if the listing is on some other form of market where there are requirements to comply with in relation to trading.
In many ways the listing rules are a reflection of the normal duties of a director. Both the listing rules of an exchange and the corporate governance code which one adheres to as a director of any company, converge. Both are interested in transparency and ensuring the equality of treatment of the shareholders.
Essentially, it is the role of directors of listed companies to provide a regular and steady flow of information to keep the market informed. The CISX facilitates this process through its bespoke news delivery service, the Market Data Management Service. However the crucial factors to consider are the content and timing of the information conveyed.
What to disclose is normally set out in the listing rules of any exchange. It will cover routine market data and notifications such as AGM and EGM notices, resolutions and financial statements, and any disposals or general corporate actions such as the issuing of more shares. But difficulties sometimes arise when releasing information which is price sensitive. For directors, one of the taxing aspects is deciding what is price sensitive and when it should be disclosed.
It would be difficult to provide a comprehensive list of what would be deemed instances in which information might be price sensitive, because it would depend on the individual circumstances however, the following are useful pointers:
- a major development not in the public domain
- a sudden change in financial performance
- a strategic development which has been leaked
- a Board decision that ought to be circulated to shareholders.
There are also rules which apply to the individual directors themselves. All Exchanges mirror each other for having a model code for directors' dealings designed to prevent insider dealing activity. The purpose of the code is to set minimum standards of good practice for directors of listed companies so they do not abuse price sensitive information, particularly in a period leading up to an announcement of results. The code sets out those occasions when insider dealing might arise.
There are some items in which the Exchange need to be notified, for example routine matters, and other times when the action needs to be cleared by the Exchange in advance. Examples when this applies would be when there are proposed changes to the original listing documents or to the capital structure of the company or if there are appointments or resignations of directors. A fuller explanation of the requirements is provided in the Listing Rules of the Exchange.
As a general rule, the Market Authority expects to be furnished with applicable information as soon as practicable following publication of documents such as financial statements and reports.
However, another important consideration is to ensure that, where securities are listed on more than one exchange, information is released simultaneously to all the exchanges so that it is fair to all shareholders. In respect of dual listings, it is also important for directors to take into account that even if a listed security is traded on another market, if the primary listing is on the CISX, directors must comply with the primary exchange's rules in all circumstances.
There are hundreds of senior finance professionals resident in the Channel Islands who will be directors of entities which are listed on a range of exchanges worldwide including many on the CISX. Although there are hard and fast rules that apply to all Exchanges, each will have their own nuances and subtleties so it is essential to understand the relevant Exchange's requirements carefully.
The Market Authority at the CISX endeavours to be as helpful as
possible to directors of its Listed Issuers and is supported by
CISX Members in this regard. Guidance notes are available on the
CISX website on both the continuing obligations regime and on the
types of announcements expect to be received.
The professional team at the CISX is always available to answer specific queries about the role of director in this context. In addition, there are a number of CISX workshops and seminars on the listings regime and on the theme of disclosure requirements for listed issuers. We have undertaken these in the Channel Islands and sometimes at the offices of Members or their clients in specially prepared, tailor-made sessions. Later this year, the Market Authority plans to stage one such a workshop in London also as part of an ongoing process of communication and education about rules surrounding listing and the principles of sound, corporate governance.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.