UK: BOOST FOR BRIEF ENCOUNTERS.

UK: BOOST FOR BRIEF ENCOUNTERS. - But do meetings with investors encourage insider dealing?

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Last Updated: 31 Aug 2010

But do meetings with investors encourage insider dealing?

Some clever and capable chairmen spend much of their time talking to the City. Others don't. But there's no doubt that meetings between those who run public companies on the one hand, and those who manage institutional investment funds on the other, are very much on the increase.

Contacts of this kind have been applauded by the Myners Committee, anxious to foster good relations between companies and investors (the institutions, after all, own 70% of the UK's equity). Most of the bigger companies hardly need to be persuaded. On the other side of the fence, the Institute of Institutional Fundholders is at least as interested in private briefings. But spokesman Julian Lefenau adds that, 'When information is given to a privileged few - which is not available to all - the potential for problems is there.' Indeed, there's the rub. For might such encounters be an encouragement to insider dealing?

Richard Lapthorne, finance director of British Aerospace and a member of the Myners Committee argues that these briefings are valuable and, assuming they are properly handled, unlikely to give away inside knowledge. 'Meetings generally stick to elaborating on broad strategies - that's robust and healthy,' he believes. Yet Lapthorne concedes that 'A one-to-one briefing conducted by poor quality commentators can risk disseminating insider information. If you're crude or lazy you can just give out the answers.' This happened, famously, before London International Group was censured in 1993, for disclosing, at a meeting with analysts and institutional representatives, the amount by which it expected profits to fall short of previous predictions.

Catherine Jones, Grand Metropolitan's investor relations director, agrees that the risk of leaking insider information is small ('all the people we use are very careful'); also that meetings with fund managers are valuable ('we want investors to understand our company'). But what about those who are not invited to briefings - the small investors? The idea of a two tier-flow of information with the small shareholder at the bottom offends against that old Conservative ideal of a share-owing democracy. Faute de mieux. As Lapthorne remarks: 'What can you do? Life will always be difficult for Aunt Mabel.'

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