INVESTORS in UK issuers have a new central online repository for disclosure documents to help them with their research – but the new “national storage mechanism” is useless if you want timely alerts about new disclosures.
The UK’s Financial Services Authority handed over full administration of its document viewing facility to Morningstar’s Hemscott subsidiary earlier this year. Securities issuers in the UK are now required to submit all of their disclosure documents electronically to the new system, creating what should be a valuable and convenient central resource for investors.
However, the FSA will not permit companies to use the new database to comply with their disclosure dissemination obligations, and the new service has not been designed to handle real-time dissemination of the information that issuers submit to it. It offers no alerting tools for investors to receive timely updates when new information is filed.
Instead, companies are required to pay one of several intermediaries – including the London Stock Exchange’s RNS service and several PR wires — to notify the market when they submit documents to the new database. These announcements are also available in the new Morningstar database.
This seems like an unnecessary duplication of work and an additional expense that is ultimately paid by companies’ shareholders.
It would be relatively straightforward for Morningstar to follow the EDGAR approach in the US and provide free news feeds to alert the public when issuers make new disclosures.
To offset the cost of administering the database, Morningstar could also provide a paid full-text feed to professional information services like Bloomberg and Thomson Reuters. This is what the SEC has done with its Public Dissemination Service, which is administered by Keane.
By compelling companies and other issuers to use “regulatory information services” to notify investors that they have submitted new information to the national storage mechanism, the FSA has in effect created an industry at shareholder expense.
The risk now is that the new Morningstar national storage mechanism will become little more than a white elephant that few investors will use, particularly as they can get the same information in a more timely manner from other sources.