Happy New Year. I don’t know how many of you are football fans, but many games are played over the Christmas and New Year period. Every morning when I tried to check the scores, I was struck by how every single headline was about the referee, whether a penalty should have been awarded, or whether a red card should have been given. I was annoyed. I wanted to read about the game, not the referee. This got me thinking about how this applied to market regulation. People want to read about how the market is performing and what companies are doing. That’s why it’s called the Business Times and not the Regulatory Times. What can we do to keep the focus on the play and not the refereeing?
The first question we need to ask is whether the referee or the regulator is intervening excessively. I have spoken on previous occasions about the feedback on our trading queries and how they can have a chilling effect on our market. We have finetuned our trading queries, which has helped reduce the number of queries. and this year, we will conduct a review of the entire trading query regime.
We have heard feedback, including from some of you today, that we should look not just at our trading queries, but also our public queries in general, because they too can also have a chilling effect on the market.
Let me caveat that under our disclosure-based regime, our guiding principle is to require the timely disclosure of material information, and we make no apologies for querying companies on material matters that in our judgment require stronger disclosure. But in light of the feedback, we will conduct a review of our query regime as a whole to see if we have been applying that materiality principle consistently.
The second is market participants must know what is and what is not allowed, and the regulator must communicate this clearly and quickly. Nothing irritates fans more than a lengthy stoppage of play. In the same way, the market also wants to see regular news flow on corporate actions which in turn will inform trading activity.
So we have published tonnes of guidance, and I personally have written a record number of regulators’ columns to set out our expectations. There will of course be complex cases where interaction with the regulator is required. We appreciate that time to market is important, and we will see whether we need to change the way we interact with the market in order to speed things up.
In football, when there is a foul, the referee can play advantage and let play continue if it benefits the team that has been fouled. You can be assured that we have our own version of the advantage rule, for example by granting waivers of our listing rules when the cost of compliance is disproportionate to the benefit.
Finally, we all need to recognize that public action is warranted once bad behavior crosses the line to challenge the fairness and transparency of our market. A few weeks ago, there was a game between the top two teams in the English Premier League. By all accounts it was a fantastic game until the referee issued a red card and sent a player off for a foul. There was a huge debate over whether the referee was at fault for spoiling the game.
This is where I think we must not conflate two issues. The first is unnecessary regulatory intervention which I agree we must avoid. The second is necessary regulatory intervention which needs to be conducted regardless of whether it spoils the game or not. You cannot refrain from issuing a justified red card just because it is an exciting game.
Public action is a deterrent to future bad behavior that crosses the line. Plus, let us face it, allowing such bad behavior to continue is not sustainable. This will have to remain as one of our guiding principles even as we review the way that we regulate.
In conclusion, let me leave you with a quote from Sir Robert Peel, who is considered the founder of modern policing. He said: the test of police efficiency is the absence of crime and disorder, not the visible evidence of police action in dealing with it so on that note, thank you very much for your attention.
