The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Securities Commission’s top executive yesterday admitted that regulators had been “lax” in ensuring public companies met their ‘information disclosure’ obligations, and said: “It’s something we have to tighten up on.”

Hillary Deveaux, speaking at a presentation given by the Bahamas International Securities Exchange’s (BISX) chief executive, Keith Davies, described the ‘timely disclosure of material information’ by listed companies as a “major challenge” for both the Commission and the exchange.

Raising the issue during the ‘question and answer’ period of Mr Davies’ presentation to the Certified Financial Analyst (CFA) Society of the Bahamas, Mr Deveaux suggested that capital markets education initiatives should not start with investors, but with the BISX-listed companies.

“I think that’s been one of the major challenges for regulators in this jurisdiction, and by regulators I mean BISX and the Securities Commission,” Mr Deveaux said.

“We have to educate the listed companies, the public companies, about their obligations in law. We see so many [errors] in that area.”

A major failing, Mr Deveaux indicated, was the failure by publicly traded companies to publish notices of material events - voted on at annual general meetings (AGMs) - to the wider investing public beyond their shareholders.

While BISX and the Securities Commission had sight of AGM proxy materials at the same time as shareholders saw them, and Boards knew what to do once investors had passed these resolutions, company management failed to post these developments as “notices in the media”.

“The management believes that once they get through the shareholder’s meeting, it’s done, but they have the obligation to inform the investing public,” Mr Deveaux said.

“The information has to be transparent, and in most cases in this jurisdiction, we have failed to some extent. We have not followed through.”

He added that when it came to material changes in public companies, “you don’t see the Securities Commission and BISX informed in a timely manner, and you don’t see a notice in the media.

“The have contravened provisions in the [Securities Industry] Act,” Mr Deveaux emphasised. “We should get them on the phone and bring them back in line.

“We have to some extent been lax in dealing with it, and it’s something we have to tighten up on.”

In response, Mr Davies agreed that the ‘timely disclosure of material information’ was vital to maintaining an orderly capital market, and ensuring investors retained confidence in both it and BISX.

“If we don’t do this properly, the confidence people have in the market is eroded,” he said, adding that there had been “some resistance from some companies” to their statutory obligations for greater transparency.

“Some of our listed companies do not understand what is meant by material information,” Mr Deveaux added. “We [the Commission] delegate authority to BISX to deal with the companies.”

The regulator’s acting executive director recalled one incident, involving a BISX-listed company that had failed to report material information, where the exchange was going to “sanction” them.

“The company couldn’t understand why,” Mr Deveaux added. “They called me and called me everything but Son of God, until I told them it was BISX’s responsibility.”

Mr Davies agreed that it was “an ongoing challenge getting companies to understand they have to disclose and why”.

The BISX chief executive was also challenged on this point by Deno Moss, a Scotiabank investment analyst, who complained that there had been no timely disclosure relating to the recent closure of a mutual fund listed on the exchange.

While not naming the fund involved, Mr Moss said its assets had been transferred to a new fund that was then listed on BISX.

Responding to Mr Moss’s concerns over the lack of information supplied to investors, Mr Davies said BISX was aware of these goings-on.

“One of the biggest problems we have with respect to disclosure is there is a gap,” he added.

This, Mr Davies explained, referred to the time that elapsed between when the company, Securities Commission and BISX approved a disclosure statement, and when it was ultimately published in the newspapers.

Acknowledging that such notices often “show up days later, weeks later,” Mr Davies said he ultimately wanted to develop “ a proper newswire service” to get public company information out to the investing public.

Still, Mr Davies said BISX lived up to its mandate of ensuring there was timely material disclosure by Freeport Concrete up until the day it collapsed and went out of business in 2010.

“When a company faces hardship, things spin out of control,” he added. “That’s when disclosure of the facts; timely, necessary disclosure is vital to maintaining confidence of market participants.

“Up to the last day, BISX was following its mandate to ensure that whatever was going on, disclosures were made and the company lived up to its obligations until the last moment.”

Mr Davies said the Bahamian capital markets could only grow if persons “keep the faith”, and believed that BISX was, through its “words, deeds and actions, doing the right thing”.