It’s 7 pm and all the workers have gone home. The factory owner comes out and nails a sign to the main door, which reads: ‘Factory is closed tomorrow – stay at home.’ The next day the workers turn up, only to find they’ve wasted their entire morning. Conclusion? The factory owner disclosed the information, but failed to adequately disseminate it. There’s a big difference.
The European Commission, however, just doesn’t seem to get it. Earlier this year, as part of its hodge-podge transparency directive, it proposed requiring companies to use their web sites as the accepted means of disclosing financial information to the market.
This means that, at a European level, companies can post their financial results online but, at a national level, they will continue using locally mandated means of financial news dissemination. In practice this involves relying on the questionable efficacy of local monopolies of regulatory news service providers. With this arrangement, the global investment community cannot be guaranteed simultaneous and timely financial news.
So while the idea of getting local corporates to vamp up their web site disclosure may sound great, the problem is that individual online disclosure does not create an effective pan-European system for news dissemination.
‘To what extent should we have a disclosure policy versus a dissemination policy?’ asks Mark Hynes, director of IR at PR Newswire, one of several global newswires lobbying Brussels to open up the market. ‘Can you imagine a potential investor or a journalist having to sign up to the web sites of [the approximately] 6,000 companies listed within the European Union?’
What next?
The EU is a slow-moving beast. This directive has quietly gone from the hands of the EC and into the European parliament for a final revision by its 40-member economic monetary affairs committee, which is set to vote on it before year-end.
So where does it stand now? IR magazine has learned that, as with other areas of the transparency directive, some members of the parliamentary committee are expressing deep reservations about the current proposal. Nevertheless, it’s unclear whether they will be endorsing any better alternatives for financial news dissemination.
As rapporteur to the committee, MEP Peter Skinner is charged with overseeing the implementation of the directive and providing an opinion to the parliament. And he is concerned that the proposal falls short. ‘It was never good enough, and they have realized that now,’ he says. ‘People want to know the instant the news is out there and that’s not going to happen if each company posts it on its own web site.’
But if this is glaringly obvious then why isn’t the EC pushing for a system of better dissemination? The answer lies with the influence exerted by local financial news provider monopolies, under the umbrella of securities supervisory authorities in several EU member states.
Fear & ignorance
According to Karel Lannoo, chief executive of the Center for European Policy Studies, an independent, Brussels-based think tank, it is likely that the EC has been warned by local securities supervisory authorities to leave their dissemination systems outside of the scope of the directive.
‘I have the impression that the EC has not dared attack these old vested interests,’ says Lannoo. ‘The national news agencies which, according to the law in different member states, have the role of disseminating financial information, earn a lot of money in this way. My fear is that if you leave it up to the local supervisory authorities it won’t happen. It should be at level one, where the EU is involved.’
Another problem, says Lannoo, is that EC bureaucrats are clearly unacquainted with the needs of the global investor community. ‘These people are in their ivory towers here in Brussels, but they probably don’t think about the wider issues,’ he says. ‘We need to have a system by which the information can be spread by competing news providers, like you have in the UK.’
According to latest reports, hopes are high that the committee will be able to agree a suitable counterproposal on financial news dissemination within the next few weeks. For the sake of the harmonization of European markets, let’s hope they do.
