Analyst cutbacks cloud briefing rules
Big cutbacks in the number of broking analysts covering Australia's largest companies are partly responsible for controversies around selective analyst briefings, a key investor group has said.
Ian Matheson, chief executive of the Australasian Investor Relations Association, said stockbroking analyst numbers had been reduced to the point where it was adversely affecting the way companies distributed information.
Companies were obliged to let the market know if their own profit forecasts differed greatly from market expectations, he said.
But companies were increasingly having to spend time drawing analysts' attention to "material information" that was already publicly available. "Over the last three to five years ... the resources that stockbroking houses have to do research on companies have been declining, so sometimes analysts are not as quick updating their forecasts as companies would like," Mr Matheson told BusinessDay.
"When companies go to the effort of putting out an announcement or saying something in an AGM which they think is pretty clear, and which analysts don't pick up and use to adjust their models accordingly, then if a company's not proactive in reaching out to those analysts ... reporting season can come around very quickly."
Mr Matheson's comments come after the Australian Securities and Investments Commission this week said it would start spot checks of official briefings between companies listed on the stock exchange and analysts.
The warning from the corporate regulator follows a scandal last month involving Newcrest Mining, in which a host of analysts and investors appeared to anticipate a restructure of the company before the rest of the market.
Mr Matheson refused to comment on Newcrest, but said the industry was grappling with the question of how to ensure a dwindling pool of analysts did not miss critical information about companies.
ASIC said on Sunday that it intended to increase its focus on company interactions with analysts by listening in on company briefings, and sitting in on one-on-one briefings between companies and individual analysts.
But it distanced the project from the Newcrest scandal specifically, saying instead that it needed to update its disclosure policy from 2000.
Still, some fund managers have lampooned the idea of ASIC policing discussions between companies, analysts and stockbrokers.
"Which meetings are they going sit in at, all of them?" asked Maxim Asset Management's Winston Sammut.
"If people know that there's somebody from the regulator sitting there they're going to be much more guarded, so they're not going to get anything out of it.
"On any given day brokers have a plethora of lunch presentations, all over the place. Which ones are they going to? There has to be some sort of selection criteria. Is it at random? I just find it very strange."
A spokesman for Newcrest said the company was co-operating fully with ASIC's request for information.
"They are also able to join in on our post-results analysts briefing calls," the spokesman said.