Insider guidelines get cool response: Exchange will need strong evidence for public censure

THE London Stock Exchange's guidelines aimed at curbing insider dealing received a reluctant welcome from the City yesterday, as sceptics acknowledged that a move towards more formal relations between investors and companies was inevitable.

The 15-page document, 'Guidance on the Dissemination of Price Sensitive Information', is a voluntary code for companies and stock market participants. It will not have legal standing, and the Stock Exchange will only publicly censure parties that blatantly go against the code if it has overwhelming evidence of misbehaviour. The Exchange will, however, privately censure companies in less clear-cut cases.

The code was published ahead of the Government's new insider dealing laws, which come into effect next week.

The Exchange issued a draft on the guidelines last November, and after hearing from more than 70 organisations it incorporated the following points:

Companies will not have incessantly to issue rebuttals of press reports if these are inaccurate because of a mistake by a third party.

Companies need not divulge commercially sensitive information.

Companies should brief employees on what to say to analysts during factory visits and the like.

Companies will be encouraged to talk to their own industry regulators about what might be price-sensitive information.

The guidance does not affect a company's duty to observe the Exchange's Listing Rules. If, however, the Exchange has reason to consider whether or not those rules have been followed, it will take account of judgements honestly made in accordance with the guidelines.

The Exchange has made guidance on sensitive information a top priority. This follows well-known cases such as its public censure of LIG last year and the prosecution for insider dealing of the Scottish analyst Thorold Mackie, whose conviction was quashed on appeal last week.

Sir Andrew Hugh Smith, chairman of the Exchange, said that the guidelines might well contribute to a change in the culture of the marketplace, both in the way that companies make announcements and in the way the market reacts to them.

'It is not revolutionary - many companies have operated in this way for years. But companies lost confidence in their procedures after recent legal changes and disciplinary cases,' he said.

'Without guidance, communication between companies and the market was being substantially reduced. If this guidance can help restore confidence, and encourage a planned approach to communicating, it will have served its purpose.'

The Exchange stopped short of compulsory quarterly reports by companies, in favour of recommending that they should keep in touch with investors as often as possible.

Martin Hall, who chaired the guidance working party, said they did not intend to push towards compulsory quarterly reporting. 'But the more often a company communicates with the market, the less chances there are of shocks.'

Chris Parsons, a partner with solicitors Herbert Smith, who has been advising companies on implementing the new guidelines, later echoed this view.

'Companies are relieved that the Exchange has not introduced formal rules on quarterly reporting,' he said. 'This would be OK for ICI but it would be unfair on smaller companies, which just do not have the resources (to produce the extra reports).

'Companies should rethink their approach (to sensitive information), otherwise there will be more public and private censures by the Exchange.'

Critics of the guidelines think they lack teeth. Mr Hall admitted the Exchange could make public censures of companies only when it had very strong evidence to back up its case.

The Exchange will review the working of the code in a year's time, and Mr Hall said it should evolve with experience.

View From City Road, page 32

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies