Corporate Governance

Listing Standards and International Enforcement

By J. Robert Brown

The WSJ provided a short article on the resolution by OMX (the Nordic Stock Exchange recently acquired by Nasdaq) of an alleged violation of listing standards.  Here is the article in toto:

• Telefon AB L.M. Ericsson didn't violate OMX AB's listing regulations by making an announcement about sales forecasts at an analyst conference last year, the Nordic stock-exchange operator concluded.
• OMX's disciplinary committee began a review after officials from the wireless equipment maker told a group of analysts in New York that sales for the fourth quarter were likely to be at the lower end of the previously forecast range.
• The November announcement, which wasn't communicated to the overall market, sent shares in Ericsson down more than 10%. OMX said the committee found the announcement was inappropriate but that "it would have been excessive to classify this as a contravention of the listing agreement."

We have no idea about the merits but what seems clear is that Ericsson engaged in selective disclosure and that this was found to be consistent with the listing standards of the exchange.  This sends a message that ordinary investors, those not invited to the analyst conference, lose out.

In the US, there is a different message.  This same issue would not be a matter for the stock exchanges.  Regulation FD, which is enforced by the Commission, requires that disclosure to analysts be accompanied by disclosure to the entire market, either simultaneously or promptly thereafter.  There are some matters too important to be left to enforcement by a for profit company.   

Full post as published by The Race to the Bottom on March 15, 2008 (boomark / email).