Last Thursday, Edward Rizzo wrote an article referring to the development of the local stock exchange. He made some import-ant points, including transparency on the local exchange. When a company obtains a listing, one of the requirements it signs up to is that of adopting the ongoing obligations to the market. Companies are expected to release information in a timely manner and treat all investors equally. The nature of the information released is aimed at ensuring investors are able to monitor the ongoing performance of the listed company, and thus make informed decisions on the value of the company. In many cases, these obligations are prescriptive and some are driven by other legislative requirements, e.g. the Companies Act. Others are not so prescriptive, leading some companies to take a Brussels-style box-ticking approach.

One of the obligations imposed on companies (those that have shares listed) is the requirement to provide interim directors’ statements (IDS).

Listing Rules 5.88.1 and 2 state that directors should provide “an explanation of material events and transactions that have taken place during the relevant period and their impact on the financial position of the Issuer and its Controlled Undertakings”; and “a general description of the financial position and performance of the Issuer and its Controlled Undertakings during the relevant period”.

The purpose of this obligation is to provide information to investors at a point in time that bridges the gap between the half-yearly and annual results, thereby providing quarterly information. There is no doubt that from a regulatory perspective all companies adhere to this requirement.

This is not the point. If one were to make a quick comparison to the quality of information that is published by London quoted companies, who are required to abide by the same rule, the gap is significant. Why the difference? Clearly UK companies apply a higher level of importance on the dissemination of information than we do. I see no reason why this should be. Perhaps it is a mindset that needs changing.

Some companies do not organise any broker meetings at all. This is a shame as all companies have a story to tell

Openness and transparency should be part of life as a “plc”. Investors and financial analysts should continue to press for change and improvement. This way the pricing of securities on the market will become more sophisticated and, one hopes, more accurate, instilling greater confidence in the proper functioning of the market.

The use of “analyst” calls, even at the IDS stage, is also prevalent in the UK. The age of technology has enabled management of companies to organise such briefings. Companies allow analysts to call in to the company to discuss with management their perform-ance and outlook. Web present-ations accompany such calls. We have often taken part in such updates internationally and we find them a useful tool to learn, direct from management, the way the company is performing. This helps de-risk investing.

It is possible that in Malta we do not need such investor calls as the islands are small and organising a gathering of some 15 to 20 people (often much less) is not difficult. I suspect though the real challenge is not logistical, but one where management prefer not to divulge such information. In fact some companies do not organise any broker meetings at all. This is a shame as all companies have a story to tell.

Adopting an open approach to the market helps strengthen the relationship and ensure information is disseminated more evenly.

Another example where progress should be made is when companies announce buy-back of their own securities.

Companies have taken to buying their own bonds, but they should announce a priori that they intend to do this, stating how much they intend to buy and at what price. This enables investors to ascertain whether they wish to sell their bonds back or not.

The current practice of select-ively buying bonds from individuals or groups of investors and then announcing the event once it is completed creates an uneven playing field.

At the moment this is not so much of an issue as investors tend to be buyers rather than sellers of bonds, but this will change. Take for example the situation where a company is using its sinking fund to buy back bonds from specific investors. Should the company run into difficulty, those investors who were lucky enough to sell their bonds back to the company would have benefited from this privileged position, in the process using up the sinking fund. Other investors who were not aware that the company was buying back its own bonds would be left out in the cold,facing a potential haircut on their investment. This is not a risk the regulator should allow investors to run.

Much progress has been achieved by listed companies, but more should be done. Greater openness and more information can be released and investors/analysts should be more inquisitive of companies. Simply turning up to the AGM for a bite to eat is not good enough.

This article is the objective and independent opinion of the author. The information contained in the article is based on public information. Curmi and Partners Ltd is a member of the Malta Stock Exchange, and is licensed by the MFSA to conduct investment services business.

David Curmi is managing director of Curmi and Partners Ltd.