Call for greater regulation of share pledges for margin loans
The CFA Institute Centre for Financial Market Integrity is calling for greater regulation of share pledges by directors and controlling shareholders of publicly-listed companies in the Asia Pacific.
Its call is contained in a research paper that lists several recent instances, including ABC Learning in Australia, where pledged shares were forcibly sold to meet margin calls, resulting in large share price declines and sometimes a change in control of the company.
The paper recommends specific regulations for controlling shareholders and directors to disclose details of shares pledged on an “event basis”.
It also recommends the disclosure of the shares owned by directors and shareholders as well as the percentage of shares owned to total issued capital.
Lee Kha Loon, head of the CFA Institute Centre, Asia Pacific, said all Asia Pacific markets require the disclosure of material price-sensitive information, but the onus is on company directors to determine whether information needs to be disclosed to the market.
In the case of pledged shares, Loon said this disclosure can occur when the share price approaches trigger points whereby lenders can exercise their right to sell shares pledged for margin loans.
This may result in further sell down of the shares by traders and investors, he said.
Recommended for you
AZ NGA’s CEO has unpacked how its recent $345 million debt facility from Barings will accelerate its advice network’s growth ambitions, and allow its largest firms to access a greater source of funding.
Research by Colonial First State has found women are reluctant to make retirement preparations, despite 62 per cent saying they feel that they are unable to achieve a comfortable retirement.
Managed accounts saw net inflows of $14.3 billion in the six months to 31 December, according to the latest IMAP FUM census.
The increased bids for Insignia from Bain and CC Capital value the company at $3.3 billion, while there is still a possibility for competing bids from rival players such as Brookfield.
