Understanding Company News: How to Interpret Stock Market Announcements by Rodney Hobson

Section A – The Rules

Chapter 1. The Right To Be
Informed
The UK’s record of preventing insider trading and forcing
companies to be frank and upfront with investors has
been rightly criticised. In particular, the Serious Fraud
Office’s record in prosecuting insider traders has been
poor and the conviction rate abysmal.
This is in sharp contrast to the situation in the United
States, where admittedly the conviction rate is multiplied
by plea bargaining and the very expensive legal process,
which encourages guilty pleas and accusations against
others rather than fighting a lengthy and ruinous case,
however worthy the defence.
Nonetheless, the climate for change has come almost
imperceptibly in the City. At one time companies would
routinely tell newspapers that they were not prepared to
comment on rumours. Now it is accepted practice that
rumours of major events (such as a takeover approach or
a slump in sales) must be confirmed or denied once they
are out in the open.
That is only right and proper. Shareholders are entitled to
know what is going on in the company that they own. It is
quite outrageous if directors – who are after all merely the
managers acting on behalf of the owners – feel they have
the right to withhold important information.

Understanding Company News: How to Interpret Stock Market Announcements by Rodney Hobson