LEGAL VIEWPOINT: Securities Markets by Dr AbdelGadir Warsama Ghalib, Legal Counsel, Bahrain

Dr AbdelGadir Warsama Ghalib, Legal Counsel, Bahrain

Investors in different types of securities normally give stock markets full activity as they are the fuel of such market. The active demand along with the vivid process of investment makes the fuel that keeps the market going in track. Investors should be provided with the required information to enable them to take informed investment decisions based on an on-going clear basis. The principle of full, timely and accurate disclosure of current and reliable information that is material to investment decisions is directly related to the objectives of investor’s protection as well as towards fair, efficient and transparent markets.

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Effective disclosure of information should be clear, reasonably specific and timely given. In this, all or any specific disclosure of information that is required, should be augmented by a general disclosure requirement. Such a general disclosure requirement normally provides that disclosure is required to all material information that is relevant to a particular investment decision before taking such decision by investors.

Another approach for such general disclosure requirement provides that disclosure is required of all material information that is required to keep disclosure made away from being misleading and could lead to failure. Laws should ensure the sufficiency and accuracy of information all along. This will involve necessary sanctions or liability on the issuer company and responsible persons who fail to exercise due diligence in providing such information. Legal and professional responsibility is taken for the content and substance of the information given, including the issuing company underwriters, promoters, directors, officers of the company and advisors.

Regulators to consider the presence of certain circumstances if necessary “to the proper functioning of the market” to allow less than full disclosure or partial disclosure. In limited circumstances where the market requires some derogation from the objective of full and timely disclosure, there may be some need for temporary suspensions from trading or restrictions on trading activities of those who possess more complete information. In such circumstances trading should be prohibited in the absence of full disclosure. This is a very important point and should be strictly observed by regulators and implementing authorities.

To safeguard fair and equitable treatment to investors and shareholders, regulations should require full disclosure of the security management and persons who hold substantial beneficial ownership interest. All, among others, is required to protect investors.