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  • Inside The Insider Trading Debate - 27 July 2013 0 comments
    Sep 16, 2013 10:33 AM

    Is it time to say bye bye to the buy side corporate lunch?

    Angela Pica, CFA Head of Advocacy, Australia and New Zealand at CFA Institute

    Peter Morgan, ex Perpetual and ex 452 Capital comes forward slamming the selective access large insto investors get with company management. He thinks that exclusive meetings should be banned or monitored by ASIC to avoid selective disclosure by company management.

    This has sparked a lot of debate with many not seeing it as an actual problem. Citing that the information shared is in the public domain and the main purpose is to gain insight into industry trends, company strategy and most of the time the quality and trustworthiness of company management.

    ASIC will be paying close attention to the communication between company management and both the sell and buy side during the upcoming reporting season. It wants to "hear how companies brief analysts and understand these companies' procedures and protocols".

    What is your opinion - should these types of meetings be banned?

    Inside the insider trading debate afr.com27 July 2013

    Equality of access to company information that could affect investment decisions is under scrutiny from the Australian Securities and Investments Commission - and, while it's a controversial issue, two ex-fund managers are happy to blow the whistle on...

    My View: (27 July 2013)

    Sridhar Balakrishna, CFA CA

    Sridhar Balakrishna, CFA CA

    Research analyst, Buy-side, Strategy, Valuation, Financial Advisory, Consulting, Asia Markets, CFA

    The US Securities Exchange Commission (SEC) introduced Regulation Fair Disclosure (Reg FD) during mid-2000 to circumvent special access/disclosure to Institutional Investors by company management before the information was disseminated to other investors. The key word in this process is the evidence of material, non-public information. Reg FD fundamentally changed the way information was disseminated to investors and allowing for more transparency. This, however, stemmed the benefits that large fund managers had over other smaller investors.

    An exception to this is defined by the Mosaic Theory, which clearly allows analysts and institutional investors to question company management about non-material, public/non-public information. However, analysts using this information in their investment decision-making must disclose the details of the information and the methodology used to arrive at their recommendation.

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