Are UK investors being kept in ignorance of important facts?
It's not uncommon for British companies to find that they are required to disclose more information about themselves overseas than they are at home. Any company which is either listed overseas or has dealings with foreign regulators is obviously obliged to comply with local legislation, and in certain cases - particularly in the US - the requirements are much fuller than in the UK. This anomalous situation has raised concerns that British companies might be withholding from their shareholders information which they have to make available to foreigners - and that UK investors could therefore be at a disadvantage to their counterparts overseas.
The Securities and Exchange Commission demands that any company listed on the New York Stock Exchange files a so-called 20-F report. 'The 20-F does require more information about company activities, plans and people,' says Richard Reeves, company secretary at British Steel. Although billed as the equivalent to the British annual report, it is universally acknowledged to require more detail, on the breakdown of the market for example.
Companies filing in the US tend to be more forthcoming about contingent liabilities. Fearful that the business might become the object of litigation in the future - on the grounds that investors were not properly informed of the company's position - managements will reveal potential actions which have almost no real chance of succeeding. Many companies object to providing all this detail. 'We have something of a tense relationship with our US legal advisers,' admits RTZ company secretary John Bradley. 'If we took their advice our filing would be almost misrepresentation - they are naturally biased towards US matters but we are a UK-based company with assets around the world.' City analysts and institutional investors agree that they can learn more about the companies they follow from US sources than they can from domestic reports. 'You will often get very useful information from a 20-F,' says Richard Hannah of UBS. 'In the case of Tiphook, for instance, it was very revealing.' But does this mean that UK investors might be left in ignorance of important facts which were available elsewhere? Certainly it did in the past. As Terry Smith of Collins Stewart says: 'It used to be a problem.' Companies would file information in the US and discourage its dissemination on this side of the ocean.
This situation has evidently changed. 'The increasing sophistication of investors means that what is available in one country will be required reading for all big institutions,' maintains Hanson director Chris Collins. 'We make the 20-F available to anyone who asks for it,' says Tomkins' spokesman Anthony Spiro. But whatever the company, the ordinary shareholder is likely to have to ask. The 20-F is not sent out automatically.
Barclays Bank, however, has combined its UK annual report and the 20-F in a single document. The bank's 1994 report and accounts included a section headed 'SEC Form 20-F cross reference and other information', and the whole report ran to no fewer than 159 pages. Elizabeth Wade, head of investor relations, explains that 'The driving force to combine the 20-F and the annual report was to cut down the number of documents in the system.' But Barclays 'also thought it would be particularly helpful to our larger shareholders. Sensible investors these days are looking for more, rather than less, information,' adds Wade.
The merging of US and UK reports in one document seems unlikely to be a rising trend. This doesn't mean, however, that publicly-quoted companies will not come under increasing pressure to reveal ever more information - particularly if it's already available elsewhere.