The Investments and Financial Services Association (IFSA) and the Australian Council of Superannuation Investors (ACSI) have issued a joint statement stipulating their stance on corporate governance.
Both bodies believe companies should adhere to the disclosure requirements stipulated in the Corporations Act and the Australian Securities Exchange (ASX) listing rules.
IFSA and ACSI also believe companies should have a defined policy on trading and exposures company directors may have.
In particular they think this policy should set out the acceptable practices surrounding margin loans taken out to purchase company stock and should be revealed to shareholders.
The industry associations have expressed concerns over the practice of securities lending that may impinge on market efficiency and erode investor confidence.
In addition IFSA and ACSI have taken the opportunity to propose security transfers, in relation to short selling, be coded for lending purposes so these stocks can be segregated from the total sales volume of the particular stock on the day.
The bodies also raised fears about the manipulation of voting rights for a company through the use of securities lending. In particular they are worried about the situation where an investor borrows shares just so he or she can influence an outcome of a proposal with a increased voting right.
To rectify this they have jointly recommended asset owners who lend securities be allowed to recall their stock to retain their full voting rights when a company vote is needed.
On a more general note IFSA and ACSI expressed interest in finding out more about how the ASX and the Australian Securities and Investments Commission monitor compliance practices.
