Tuesday, November 27, 2012

Silence is not golden

To be told or not to be told? That is the question.

Do listed companies tell investors that their business may be at risk? Or do they save themselves the trouble because the possibility is so far fetched, it is almost laughable?

All prospectuses by companies going for a listing stress on informing investors of "every risk", whether imaginary or real.

If not, why would every prospectus talk about not only risks inherent to the industry the company is in, but also the country and world's economy?

The rule of disclosure after all is based on a very simple premise.

Timely and relevant information help investors make informed investment decisions.

But what qualifies as timely and relevant information is where it gets complicated.

There are guidelines for immediate disclosure by listed entities. Some are spelt out, while others are deliberately left vague to encompass a myriad of possibilities.

This is understandable considering that the stock exchange regulator governs many companies across various industries.

But one would expect this to work in favor of investors, not against it.

A case in point is AirAsia Bhd.

Last Friday, this paper reported that the low-cost carrier has been accorded only a six months right-to-fly due to shortcomings found in its flight operations procedures and practices. A renewal of its air operator's certificate (AOC) would have given it a two years right-to-fly.

Other news reports followed, but neither was AirAsia -- as a listed entity and a Kuala Lumpur Composite Index 30 Index stock -- queried by Bursa Malaysia on the matter nor was the Department of Civil Aviation (DCA) compelled to explain the circumstances surrounding AirAsia's shortened AOC.

While no one really believes that the authorities will close down a corporate giant like AirAsia, investors and the flying public have a right to know the kind of risks it is exposed to.

And who better to give them the right information than the regulators?

AirAsia's excuse was that such matters are confidential, definitely not for public consumption. It said it was between the DCA and the airline to sort the matter out.

And the DCA? Well, the aviation regulator believes that silence is golden.

Then of course there's Bursa Malaysia, the regulator for listed companies.

While its rules are clear. Its practice is not.

Its rules stipulated that: "In the event that material information is or is believed to have been inadvertently disclosed to third parties or where the material information has become generally available through the media or otherwise, the listed issuer must immediately announce the information to the exchange."

But till today, no word has been forthcoming from AirAsia and not a query from Bursa Malaysia three market days after reports on the matter started appearing.

The argument that an airline's right-to-fly is not "material information" does not hold water because if an airline's right-to-fly is not important to its operations, what is?

And so, we wait. Possibly for nothing, because as members of the public and investors we do not have a right to information. Rather, we just have a right to know what they see fit to tell us.

 http://www.thesundaily.my

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