The principles, which were issued in draft form by the Financial Services Institute of Australasia (Finsia) and the Australasian Investor Relations Association last week, establish guidelines for the flow of information between companies and analysts and aim to restore some integrity in the research process.
The principles were drafted by a working group of research analysts and investor relations managers, and follow a similar format to a code already in practice in the US.
Among the principles is an agreement for companies not to unreasonably limit an analystÆs access to company information and senior management.
The guidelines acknowledge that companies are often bombarded with requests for information from different sources, but contend that analysts play a crucial role in the financial markets and that companies should make time for in-person meetings.
ôListed entities should respect an analystÆs duty to ask hard questions, point out potential risks, and make fair, unbiased assessments based on facts and their own forecasts,ö says the new code.
The guidelines also ask analysts to play fair, stating that they should not threaten a company with the prospect of unduly critical or unfavourable research findings in order to secure greater access to information.
They also suggest companies should be given the opportunity to correct factual mistakes in the broker reports before they are issued, though analysts should remove recommendations, ratings, valuations and target prices from the reports before showing them to senior executives.
Issues of persecution are also covered in the code with both companies and analysts warned against airing their grievances over the contents of research reports in the media. ôListed entities may respond to media enquiries about an analystÆs report but only by exclusively referring to publicly available information,ö says the code.
Finsia has given the industry until late April to comment on the guidelines, after which they will be ratified. The guidelines are not enforceable by law but will act as a code of conduct.
