There’s a growing consensus that corporate regulation in Australia became something of a laughing stock during the Howard years. Maybe we should hire now resigned New York Governor Eliot Spitzer to lead a combined ASIC/ASX once the monopolists have been stripped of their regulatory role. Feisty fund manager Peter Morgan has provided a fascinating “to do” for the corporate cops in this fabulous letter to The AFR today:
Regulators fail to tackle price rigging
A vicious winter bear market is upon us and at last the hibernating regulators have decided to stir. Having worked in the sharemarket for more than 20 years I’m still not actually sure which regulator does what, but let me offer some observations while they are awake. Up until the recent credit crisis insider trader was running amok. Between April 2006 and June 2007 I counted 31 major (top 300) listed Australian companies whose share prices miraculously and materially moved upwards 20 days before a major announcement.
I only passed statistics at university, but I reckon the statistical probability of 31 companies’ share prices coincidently moving like that ahead of an announcement is more than a million to one.
Where were the regulators? Nowhere. Oh, sorry, they might have issued what the market quaintly calls a “speeding ticket” on a few occasions.
Talking about continuous disclosure and speeding tickets, what about this for a joke On May 29, 2007 Macquarie Group held an education series called Latest Developments in Continuous Disclosure Violations. The lecture was given by very senior lawyers who advise companies on continuous disclosure obligations. Remarkably, when asked about the share price move in Promina and Suncorp ahead of a merger announcement, a senior lawyer said: “Our advice to corporates is to only make an announcement when it gets mentioned in Street Talk”.
Fair dinkum, the regulators are now making a song and dance about hedge funds, rumours and share prices going down. What about when they miraculously went up. Also, while you’re on the job, the Australian Securities Exchange (I know it’s costly) but how about doing something about the pyramid schemes and their price rigging to get success fees; how about investigating investment bankers and their schmoozing of the pres; how about looking at the share price movements at the end of the month, commonly referred to as “muck-up day” when some fund managers blatantly rig performance; how about looking at research houses that recommend fund managers who give them advertising; and how about looking at why certain stockbrokers have never had a sell on any of the numerous listed vehicles for more than five years despite price rises and changing credit conditions. Finally, I’ve got a funny feeling that most of the rumours you investigate might turn out to be true.