MiFID II - Will you be overlooked?

The world of corporate governance and investor relations can be a tumultuous one. Legislation is often changing and if you are listed in the UK, you will know all too well the stringent approach taken towards transparency.

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Indeed keeping on top of this constant shift can be difficult, but whilst legal teams and auditors will monitor the legislation, there are certain initiatives like the Markets in Financial Instruments Directive II (MiFID II) where it is not so much adhering to the law, but understanding its implications. In a nutshell, this initiative increases regulation on firms who provide services to clients linked to financial instruments (shares, bonds, etc.), introducing a requirement for more transparency on these transactions in a bid to protect the investor further. However, it is the ruling that asset managers must pay separately for the research and advisory services they receive from banks, brokers and other research providers that is of interest here.

Reflecting on this, and after reading the opinions of numerous sources in the industry, it is clear that we can expect to see certain changes, one being less research undertaken on all stocks, as alluded to by Edison and Steve Kelly of Steve Kelly Research, with Edison predicting a contraction in sell side coverage. Whilst the implications of this could be numerous, from an investor relations perspective, progressive and attractive companies for investment could be overlooked unless they communicate their key messages coherently, consistently and through the correct media.

With research undertaken coming directly from asset managers, P+L sheets or a dedicated fund, it is safe to say that they will not commission research on your company in order to advise investors to purchase shares, unless they are given a reason to.

Although we can’t say for certain that seismic shifts will occur due to this legislation, the risk for companies is ‘being overlooked’ by the investment community, and as demand for shares is often the biggest factor in price, we can assume that investors will not want to buy your shares unless you give them a reason to do so. Herein lies a focus for both IROs and their corporate communications partners to tell their investment proposition in the most transparent, coherent and compelling manner.

In the IR industry, we are seeing that some companies are giving potential shareholders a reason to invest, through consistent reporting, branding and digital offerings. For these companies already practising a good communications strategy, our opinion is that they are less likely to be overlooked.

We will always put our ‘investor hat’ on from the word go. We will guide you through the process of communicating the right messages to the right audience, through the right media, ensuring that you won’t be overlooked in the marketplace.

We would love to help you tell your story. To find out more, talk to a member of our team.