Forget more rules; disclosure culture and mindset must change

THE local capital market has operated a "caveat emptor" regime for almost two decades now, under which transparency and honesty form the bedrock of disclosures so as to ensure that the investing public has all the information needed to make informed decisions.

There is no denying that progress has been made over the years and, together with the efforts of various organisations to raise financial literacy standards since the early 2000s, investors are today more equipped to look after their investments than in the past. As with any ongoing initiative however, there is still room for improvement. And when it comes to disclosure, everything depends on whether the issuer of the information wishes to reveal the substance of the deal that forms the subject of announcements, or if they desire to adhere to only the form.

For example, not long ago when the independent financial adviser (IFA) to the board of a company that is the target of a privatisation- cum-delisting offer by the major shareholder recommended that minority shareholders reject the deal, this guidance would be posted online by the company as a "General Announcement'' with a bland, nondescript line "Voluntary Unconditional Cash Offer: Circular to Shareholders''.Technically, the company satisfied disclosure rules because on the surface it was a circular to shareholders but in fact the release came from the IFA, and contained material information.