Share disclosure rules tightened

City regulators announced new disclosure rules yesterday aimed at discouraging attempts to artificially drive down the share prices of the electricity generators before the imminent big power sell-off.

The Stock Exchange is also bringing forward introduction of a shorter, five-day settlement period, to apply to all big issues such as the National Power and PowerGen second tranches.

The regulators stressed that the arrangements were intended to curb manipulative actions by professional investors and would not affect private transactions.

The Stock Exchange is acting along with the Securities and Investments Board, the Securities and Futures Authority and Liffe, the London futures exchange. They are responding to the controversy sparked by several big rights issues or share offers in recent years, where the seller has felt that it received an unreasonably low price because of the aggressive tactics of some market participants.

There were calls by institutional investors and companies to curb short-selling, whereby dealers sell large blocks of shares they do not have in the target company, in the expectation of buying them later when the price has dropped. The device is outlawed or restricted in some financial centres but is daily dealing practice in London.

Worried that London could lose its appeal to big issuers, the regulators have offered a mild compromise, hoping to discourage abusive short-selling while allowing normal practice to continue.

The shorter settlement period is designed to make it easier to see more quickly who is selling and how they are selling. This strengthens the threat by PowerGen and National Power not to issue many shares to those exposed as manipulators.

New disclosure arrangements mean the volume of share dealings in the vendor company, the number of shares borrowed, and the scale of open derivatives positions will be shown on a daily basis. It will show the so-called pent-up demand for a company's shares, revealing who might need to come back into the market to buy.

The arrangements will begin on 30 January and run on a trial basis during the power sell-off.

Outlook, page 17

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