Regulations and Law

Shareholder Rights Being Eroded

There is a good article in the Financial Times today (Saturday 22/6/2019) which is headlined “UK shareholder rights being eroded”. As the article says, almost no investors who buy shares legally own the shares they have bought, which rather surprises them. That’s because most of them buy via nominee accounts operated by stockbrokers and platforms. Not only that, but most nominee accounts are “pooled” accounts so even identifying who are the “beneficial owners” is not always easy. Does it matter? Yes it ...

Slack IPO, Web Privacy and Sell on Monday

The IPO of Slack in the USA has received a lot of media coverage. This is one of those technology stocks that is on what at first glance is a sky-high valuation. Slack provides workplace collaboration software and last year had revenues of $400 million, and lost $140 million. The market cap is now around $20 billion which means it is valued at about 50 times revenue. Those are the negative numbers. The positive aspect is that it roughly doubled revenue ...

Woodford, FCA, Asset Management

Today the FT reveals that the FCA have launched an investigation in the Woodford Equity Income Fund. Last night in the Evening Standard, Anthony Hilton estimated that only about 200,000 people were invested in Woodford funds, and added "so why all the fuss". I think it is about trust. Most people in the UK do not trust business. For example, it does not help public levels of trust when Woodford takes a £36m dividend (from Woodford Investment Management Limited year end March 2018 ...

Progress at Last! Review of Intermediated Securities

As members of ShareSoc will know, our Shareholder Rights Campaign is one of our most important activities. The current difficulty of contacting shareholders whose shares are held in nominee accounts, and the difficulty many such shareholders have in voting, is a severe impediment to driving necessary change. This is a particular problem with smallcap companies. In other words, without improved shareholder rights, it is difficult for any other campaigns directed at problem companies to succeed. Less scrupulous directors know this and feel ...

Paying Illegal Dividends, Burford Capital, Woodford Patient Capital Trust and Zero Carbon Objective

A group of investors including Sarasin, Legal & General, Hermes and the UK Shareholders Association (UKSA) has written to Sir Donald Brydon who is undertaking a review of the audit market. They have yet again raised the question of whether the International Financial Accounting Standards (IFRS) are consistent with UK company law. In particular they question whether profits are sometimes being recognised, thus allowing the payment of illegal dividends. The particular issue is whether profits can arise on certain transactions under ...

Good News – Autonomy CFO Jailed

Good news – former CFO of public company jailed for fiddling the accounts. Oh to see that happen more often so as to deter manipulation of accounts that is so prevalent and so damaging to investors. Sushovan Hussain, the former CFO of software company Autonomy, was sentenced to 5 years imprisonment by a US Court yesterday plus he was fined $4 million and ordered to forfeit $6.1 million he made from the sale of the company to Hewlett-Packard. He won’t even be ...

Changes Proposed at Companies House

The Government BEIS Department have recently proposed a number of important changes to the way Companies House operates in a public consultation entitled “Corporate Transparency and Register Reform” (see https://tinyurl.com/yysf9gdn ). Here’s a brief summary of the main points: This consultation will be of interest to anyone who is a director of a private or a public company, or a major shareholder in such a company (i.e. those People with Significant Control). Even directors of the smallest companies could be affected. A major ...

Warren Buffett and FCA Review of RDR & FAMR

There was an interesting article on the career of Warren Buffett in the last FT Weekend magazine. It was a wide-ranging interview with the renowned investor who became one of the richest persons in the world by making investments which consistently outperformed the markets over the last 50 years. At age 88 he still claims to be having fun by working at investment. But in the last ten years he has fallen behind the S&P index. The reason is primarily because he ...

Audit Market Shake-Up, Ocado on TV, and Judges Scientific Presentation

The Competition and Markets Authority (CMA) have issued their final recommendations to improve competition in the audit market after an earlier public consultation. This follows widespread concerns over the dominance of the big four audit firms, the lack of apparent competition on price or quality, and repeated complaints about the quality of audits following several big and small company failures. Audit firms seem to have got off relatively lightly if the CMA’s recommendations are implemented by the Government. Here’s a brief ...

Debenhams PrePack, Dunelm Trading, ASOS and Privacy

Department store operator Debenhams (DEB) has been put through a pre-pack administration. It’s been bought by a new company formed by its secured lenders. Mike Ashley of Sports Direct is furious. His company invested £150 million in the shares of the company in the hope of taking it over, which will now be worthless. He had some choice words to say on the subject which included that it was an “underhand plan to steal from shareholders”, “as normal politicians and regulators ...

FCA Makes Platform Switching Easier

The Financial Conduct Authority (FCA) have today announced some measures to improve competition in the platforms market. Experienced investors who use electronic trading platforms will be well aware of the problems of switching to another provider if they are dissatisfied with the service, wish to move to a cheaper provider or for other reasons such as consolidating on one provider or spreading their risk over several. It simply takes too long to move “in-specie” holdings from one platform to another  ̶  ...

FRC Revolution to Fix Audit and Accounting Problems

A major announcement that will impact investors was made yesterday by the Government. You may not have noticed it in the midst of political turmoil, but it’s worth studying. The Kingman review of the Financial Reporting Council (FRC) was published last December. It was a quite damning criticism of many aspects of the current regulatory regime that had resulted in so many audit failures and poor-quality financial reporting. See my previous blog post on this subject here: https://roliscon.blog/2018/12/18/all-change-in-the-audit-world/ There are few experienced investors ...