Monday, April 18, 2011

Decent Disclosure

In writing this piece on the name suppression of Mark Hotchin and the issue of non disclosure by the courts of his name to the public I got to thinking about disclosure as a whole and what that meant in such a small country like New Zealand.

In the Hotchin Ponzi Scheme case, lack of disclosure of his name to potential investors in his failed Hanover Group had some well known and serious consequences for those people unaware of Mr Hotchin's financial background and non disclosure in New Zealand business has a long history of keeping investors in the dark when it comes to them making decisions based around who they might invest with.

We have seen bankrupted and disgraced company directors and CEOs continue to recycle themselves multiple times because there has either been no onus on them to disclose their past or they have not been compelled to disclose due to insufficient regulatory restraint.

The issue over the size of New Zealand is perhaps one of the more concerning areas around disclosure to the investing public. Each of us in this country on a personal level are only a few people removed from some stranger that a friend or the friend of a friend might know and in business this relationship is even closer.

This is apparent in boardrooms (and indeed bedrooms) across the business spectrum and the lack of honest and open revelation that one may have a conflict of interest in a business deal because they might already have some kind of interest in any of the other parties doing the deal is more often than not the staus quo.

This issue over the size of the business community in New Zealand and the subject of disclosure is perhaps more worrying and has its biggest impact in the arena of business journalism. This has always been the case with traditional media but has been happening more frequently and surreptitiously in the age of the internet and especially with the rise in popularity of social media like Twitter and Facebook.

I always declare any conflict I might have when I am writing here by adding a small disclosure note at the bottom of the post but that sort of thing is not often done these days. With some brokers and investment house CEOs doing their own writing across the various media platforms, it is misleading to say the least for individuals not to declare what bias they might have simply by declaring what shares they might own or manage, whether they have done business with someone in an industry they are writing about or whether they have some kind of personal relationship with their subject.

The issue of disclosure relates directly to the ability of a potential and current investor in an asset to trust as much as possible that the asset being invested in is what it is and along with an investors own research in facts and figures disclosure of conflict or potential conflict is an important part of cementing that trust.

Clear disclosure needs to happen more in such a small country and while I loath the heavy regulatory hand of the State with a passion more must be done in legislation to protect investors than they are currently in terms of disclosure.

Without clear disclosure, markets and business in general is that much the poorer in terms of our ability to have faith in what we invest in.


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From Fishpond.co.nz

Every Bastard Says No: The 42 Below Story

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c Share Investor 2011