During February 2015, the UAE’s Securities and Commodities Authority (SCA) issued the first Investor Relations (IR) guidelines for publicly listed companies that making it mandatory for these to implement a range of reporting and disclosure standards to ensure that a level of corporate transparency towards the investment community is maintained. Oliver Schutzmann, CEO, Iridium Investor Relations spoke to Zoya Malik about the guidelines‘ implications.
How will SCA’s new guidelines create investor confidence in the UAE market?
“By obliging companies to dedicate resources to Investor Relations, the guidelines ensure that companies will communicate more consistently and professionally with investors. When companies appoint dedicated IR officers, their communications with investors should improve and align to international standards. When companies build dedicated web pages for investors, they enable investors to gain greater understanding of the company. After all, investors can only buy what they can see and understand.”
What are the additional layers that need to be developed in terms of reporting and disclosure in UAE? What’s been lacking? “Reporting is still largely driven by manual procedures in the UAE, while the most developed markets use automated disclosure systems to
ensure that all market participants have access to the same information simultaneously. Many companies in the UAE do not have a convincing investment case, based on a well- thought out business strategy. They also lack the expertise and information required to get their story noticed by the investors who can make a difference to their valuation. Companies can also do simple things to enhance their credibility, such as minimising the time between the end of a reporting period and the report itself, to minimise the opportunities for information to leak into the market.”
What will be the impact on IR functions within listed corporates? “IR functions will get a boost from the recent regulations, although the best companies already go beyond the bare minimum because it adds value to the company in terms of market capitalisation and liquidity. If investors understand your company, they are more likely to invest in it.
What should investors demand from the IR function?
“Investors need accurate and timely information. They also need to hear a consistent story from a company‘s management, which is then consistently delivered. They need to feel that they are being informed if challenges appear. Whether they are seeking to attract investments from a value or income player, companies need to tell a consistent story over time and show results. Investors like face-to-face meetings and investor days which help them to understand the company‘s strategy unrelated to the quarterly reporting cycle.”
How will banks and finance institutions react to these guidelines?
“Banks and financial institutions support these guidelines because they are generally involved on both sides of the investing equation. Improved disclosure and transparency will benefit this involved in the financial sector because the population of investable assets will grow and activity levels will rise.”
What will be the impact on BFI operations of these guidelines? “Banks and financial institutions in this region are already largely equipped with basic Investor Relations capabilities. But these new guidelines raise the game for all concerned, and many banks and financial institutions are now seeking to move to the next level in terms of investor engagement. They are seeking to automate their disclosure systems, and use state-of-the-art Investor Relations CRM systems to ensure they are maximising the value of their professional relationships, and thereby maximising the value of their stock.”
How must BFIs invest now to improve the remit for IR throughout its operations?
“Banks and Financial Institutions, being both investors and objects of investment, are the natural leaders in Investor Relations. As other sectors improve their Investor Relations, it is essential that banks and financial institutions maintain their lead. There is a need to invest in automated services, both for analytics and disclosure systems. But most importantly, banks and financial institutions should review their Investor Relations practice and benchmark it against best practice to ensure they continue to extract maximum value from their investor relationships.”
What are the challenges for the roll out by end 2015 as mandated by SCA? How is the SCA involved in supporting corporates improve IR functions?
“Most market participants are already in compliance with the new regulations. But if you remember, the regulations set a minimum standard and also a suggested higher standard, including holding regular investor conference calls and investor days. The increased engagement with investors will ultimately be good for the market, but it also comes with new risks for any company that is not prepared. If a company engages more actively with
investors without doing the proper preparation, it could end up badly for the company. So investment in new Investor Relations capabilities, and engagement at the highest level of the company, are essential to ensure companies benefit from the new standards.”
What is the remit of the company you are heading? Who are your clients?
“Iridium is the region‘s first pure-play Investor Relations company. Iridium‘s singular focus is on investor, financial and corporate communications from an Investor Relations perspective. We have exclusive partnerships with the world‘s leading technology and solutions providers which allow us to offer analytics, advisory, access and automation services. We also provide bespoke communications advisory and consultancy services in high- impact situations that can enhance a company’s ability to advance, transact and grow.”
What are your plans for 2015?
“High quality Investor Relations are the hallmark of a successful capital market, and in 2015 Iridium will be working with listed companies, exchanges and regulators across the Arabian Gulf states to help build investor confidence and make the region‘s markets more successful.”