Top bankers back calls for greater investor protection
By NEIL HARTNELL
Tribune Business Editor
TOP Bahamian investment bankers have backed calls for enhanced protection for minority shareholders to be extended to all private companies who solicit investors via Private Placement Memorandums (PPMs), especially when it comes to the provision of audited financial statements.
Owen Bethel, head of Nassau-based Montaque Group, urged all public and private companies with minority investors to assess their corporate governance and maintain positive relationships with all shareholders, arguing that all equity holders should have access to data on their investment's performance.
And Kenwood Kerr, Providence Advisors' chief executive, agreed that "to maintain the integrity of the market" there needed to be "adequate disclosure and reporting requirements", so that public and private company investors knew every detail on their investments.
Their calls come after a retired Bahamas-based accountant, Bill Hogg, complained in a 12-page letter to Attorney General John Delaney about the alleged "shabby treatment" he and his wife received from Galleria Cinemas, arguing that they were denied access to any audited financial statements on how the company was performing for a decade after investing in its two Private Placement Memorandums (PPMs) in the mid-1990s.
Now, the sentiments expressed by Messrs Bethel and Kerr are likely to increase the pressure on the Government to further tighten protection for minority investors in the new Securities Industry Act and accompanying regulations, which are set to be debated by Parliament this week.
Mr Bethel declined to comment directly on the contents of the Hoggs' letter, given that the Montaque Group is still Galleria's registrar and transfer agent.
However, he told Tribune Business: "Certainly, the call for new legislation is timely, and could certainly assist with the rights of minority shareholders in private offerings.
"The investor relationships across the board in all entities that offer shares to the public, in one form or another, is something all these companies in their corporate governance should be looking at, and intending to have positive relationships with their investors."
He added: "We are pleased that the matter was ultimately resolved, and hope the Hoggs, despite their experience, are satisfied with the final outcome.
"Certainly, any person who goes into an investment should have some protective rights in terms of the information that they will be provided with to be able to gauge and assess their investment."
Mr Kerr concurred, telling Tribune Business: "Their should be adequate disclosure and reporting requirements to these persons. I think it's important to maintain the integrity of the marketplace. There should be something in place to give them protection."
Yet he added: "The very premise of the market is caveat emptor, buyer beware. You have to be an informed, educated investor. I haven't read the new Act, but at the core of the capital markets is the buyer must beware. You cannot legislate for non-registered participants."
In his letter to Mr Delaney, Mr Hogg wrote: "It cannot be right that a company can refuse to provide minority shareholders with any information on the company should the majority shareholders desire not to do so.
"This is particularly of concern where the shares are issued subsequent to a 'private offering' during which certain financial projections are given. In our case, the amount involved, not to mention the exorbitant cost and well-known experience of delay and frustration when attempting to obtain redress through the court system in the Bahamas did not justify the retention of an attorney. The only remedy in such a case, therefore, appears to be for the minority shareholder to sell their shares. Without the necessary financial information, they are unable to arrive at a proper valuation for the shares, and there is no way that any third party would be interested in buying their shares either. They are left at the mercy of the company with regard to the price offered. My wife will never know whether the price received for her shares was reasonable or not."
Mr Hogg urged Mr Delaney to further amend the Securities Industry Bill to provide more protection for minority investors in private companies, requiring that audited financial statements be sent to all shareholders prior to an AGM "unless waived by all shareholders."
Christopher Mortimer, Galleria's managing director, though, denied the Hoggs' claims, saying: "For the record, I can tell you that the company has fully complied with every requirement as it relates to the law. We are a private company and comply with all aspects of the law."
April 11, 2011
tribune242
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