So David Beckham is off to Real Madrid, leaving Manchester United plc (United) £25 million the richer. Sadly, my company would not be as well off if it had sold me to a rival publisher. But nor would it be facing preliminary enquiries by the Financial Services Authority (FSA).
The FSA has confirmed that the enquiries relate to an announcement made by United in the week beginning 9 June 2003. The regulator's interest is thought to focus on the timing of a regulatory announcement about Italian and Spanish clubs' interest in signing Beckham. United had issued a press release on the subject two days earlier (www.manutd.com).
The FSA monitors compliance with, among other things, the UK Listing Authority's Listing Rules on dissemination of information. Subject to various exceptions, listed companies (such as United, whose shares are traded on the London Stock Exchange (LSE)), must notify a Regulatory Information Service without delay of major new developments that may affect their business if the development may lead to a substantial share price movement; and of information concerning a change in financial condition, performance or expectation of performance if the change would be likely to lead to a substantial share price movement (paragraphs 9.1 and 9.2, Listing Rules).
The FSA could not say when the outcome of its preliminary enquiries would be known. Many such enquiries do not proceed to the next stage, which would be a formal investigation by the FSA. The penalties for breach of the Listing Rules include public censure and unlimited fines on the issuer and any director knowingly concerned in the breach.
Methods of corporate disclosure may, in any event, undergo changes in the near future if certain proposals, aimed at improving access to information about issuers, in the draft Transparency Directive become law. The Directive will apply to all issuers whose securities are admitted to trading on a regulated market in the EU and the current aim is for member states to have successfully implemented the Directive by 2005 at the latest (www.practicallaw.com/A29865).
The European Commission is concerned that there is wide diversity in the methods of information dissemination required by EU member states and that in many member states information about an individual issuer cannot be found in the same place. These can be an obstacle, it says, in issuers seeking access to regulated markets across the EU and can impede investors' decision-taking.
The proposed Directive aims to ensure that each member state operates a system for disseminating information on a particular issuer at a single source. A home member state (for an EU-incorporated issuer of shares, the state where it has its registered office) therefore could not prevent an issuer from using a single medium for disseminating all regulated information and would have to require issuers to use "such media as may reasonably be relied upon for the effective dissemination of information to the public throughout its territory and abroad" (Article 17). The type of media may be specified in the Commission's implementing measures and could include company websites. "It is a general theme from the EU that disseminating information through an issuer's internet site is a good thing," says Vanessa Knapp, partner at Freshfields Bruckhaus Deringer.
The Commission also proposes that host (as against home) member states should not be allowed to impose on issuers any requirements regarding the media to be used for disseminating regulated information, but they may require issuers to publish regulated information on their websites and alert interested parties by e-mail (or paper if requested) to new disclosures or any change in the published information. A host member state is one in which securities are admitted to trading on a regulated market, if different from the home member state.
The number of issuers whose securities are traded in more than one member state may currently be relatively low, but, says Knapp: "it may be a growing number and if the Financial Services Action Plan is successful, may increase further because the aim of that Plan is to make it easier to offer securities traded in more than one member state." The securities of about 100 EU companies are currently traded on the LSE.
The proposal to use websites to disseminate regulated information has met with resistance in the UK: the LSE, Confederation of British Industry, Association of British Insurers, Investor Relations Society and news services PR Newswire and Waymaker made a joint submission to the Commission in June 2003 saying that as the sole or primary means of disseminating key regulatory information, company websites have considerable limitations. These include the cost and impracticality of constantly trying to monitor many websites on an ongoing basis; the absence of contextual news; potential "disorderliness" in the market in a company's securities as information disseminates gradually into the market; and the danger that less favourable news could be placed in less accessible parts of a company's website.
Searching for information on a website certainly can be frustrating and time-consuming and it is with this in mind that I can give busy lawyers the web address of United's Beckham Transfer Timeline, which gives all the twists and turns in the saga, as played out in the press: www.manutd.com/news/fullstory.sps?iNewsid=37498&itype=466&icategoryid=120.
Kirsten Birkett, PLC.
The joint submission of the LSE and others is available at www.londonstockexchange.com/newsroom/features/story19-06-03.asp.