Stop director margin calls
Directors of publicly-listed companies in which they also have an interest should be precluded from using that interest as collateral against margin loans, according to a spokesman for a key accountancy group.
The chief executive of accountantsRus, Adrian Raftery, said in the wake of recent events affecting at least two major publicly-listed companies in the past month, including Allco Finance Group, he believed the Australian Stock Exchange needed to regulate against company directors being able to utilise their public company’s shares as collateral against margin loans.
He said that any such rule change should also extend to their family’s company or trust investments in the public company.
“Having a chief executive officer sell a large parcel of shares sends a very bad signal to the rest of the investors, particularly the mums and dads out there,” Raftery said.
“A forced selling due to a margin call generally has the effect of a further fall in the share price, which can then lead to some panic selling by other shareholders,” Raftery said. “It amplifies the situation. It is just plain and simply wrong.”
AUTHOR
Mike Taylor
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