City row over director deals
A TOP City figure has spoken out against a decision by the Financial Services Authority to prevent stockbrokers from notifying clients that they are passing on shares being sold by a company director.
Directors’ share sales can have a material impact on market sentiment towards their company. Many brokers thus traditionally gave investors a heads up if they were about to purchase shares that had just been sold by one of the issuing company’s directors.
In a recent directive, however, the FSA has made it clear it perceives this as the passing on of insider information. Brokers aren’t happy and a group of them are now trying to persuade the FSA that it is taking the wrong approach.
“Canaccord’s view is that in certain instances we should have the right to disclose a material event to a potential purchaser of stock,” says Mike Cuthbert, head of equity capital markets at Canaccord Genuity.
The FSA acknowledges that brokers worry that if they do not disclose the fact that it is a director’s stock they are selling, they may lose subsequent business from clients to those who do make such disclosures.
But the FSA says such disclosure could be a breach of insider rules.