“All of the firms we spoke to were confident that leaks of information relating to public takeovers did not originate from within their firm,” says the FSA in its report back on insider information in M&A, in which it looked at four recent deals.
Really! You mean they weren’t lining up to confess to leaking like a sieve: “We blab to everyone,” uber-bank told the regulator. Now that would be news.
But wait, the FSA has clocked this, with its unerring ability for comic understatement:
Given the firms with whom we spoke included some of those who are the most active in UK public takeover deals, and given the observed price volatility on a proportion of such deals, it seems reasonable to conclude that parties were perhaps too complacent that their own internal procedures were already robust.
The FSA has not convincingly addressed the topic of inside information. Their study earlier this year found that a quarter of announcements in 2005 were preceded by suspect share price movements - a figure berated by some as improbably low - and it has suffered in comparison with the more aggressive stance taken by its US counterpart.
In its latest inquiry, firms apparently conveyed that given the time and effort involved, an internal review following a suspected leak was not worthwhile where there was no initial reason to suspect that the leak came from within their organisation.
The FSA thinks otherwise, suggesting that a more formal review process might act as a deterrent and raise awareness.
The City watchdog also take issue rather with the firm’s definition of insiders, with one firm counting almost 200 on just one deal. “Firms,” it said, ” should generally be applying more rigour in deciding who needed to know about a deal.” Access around IT systems could also be tightened, it added, and training improved and expanded to take in support staff.
Another gently, gently point from the regulator:
Some firms emphasised their reliance on the use of code words as keeping information confidential. Whilst accepting the possible benefits, we note that the use of code words in isolation could be largely ineffective as most parties agreed that code names can be relatively easy to interpret and sometimes were poorly chosen.
What! - you mean people weren’t flummoxed by the choice of code words which invariably have the same first letter as the company referred to?
Next up? The FSA will “step up” its work in this area. The PR industry is in the firing line, along with other unregulated types, with the intention of establishing a Statement of Good Practice. And the regulator is planning to host “roundtable discussions,” and to take a “robust line” where there are leaks that may have been caused deliberately or be due to weaknesses in control or behaviour.
They should be spoilt for choice…
