ASIC and the ASX have a little game going,
pretending that Australian analysts don’t get monstered by their bosses to
write research that might be coloured by the financial ambitions of the
investment business that pays their wages.

As long as they keep pretending, they don’t
need to explore the sort of official separations of research reports and
wheeling and dealing now insisted on in the United States.

Mike Mangan’s expose of how News Corp uses
its massive weight to silence critical analysts
– denied by Rupert, of course – is, unfortunately, not an exceptional occurrence.

Which makes the “code” agreed on by the
Australasian Investor Relations Association and the Financial Services
Institute of Australasia to protect honest analysts a nice idea, but a joke.

The
AFR has the story today of Australia’s
biggest listed companies promising not to sin-bin analysts who release negative
research reports. According to the Fin, the code means “companies will commit to not unreasonably
limit an analyst’s access to company information or senior management and to
not withdraw or restrict investment banking business with the analyst’s firm”.

“In the course of communication,
analysts and listed entities should not apply coercion or pressure by
disrupting, or threatening to disrupt, the free flow of information upon which
market integrity depends,” the non-enforceable code advises.

Which means it’s all rubbish. The
interesting thing, though, is the implicit admission that such behaviour does
happen and has happened – while ASIC and the ASX still pretend it doesn’t. So
weak are the two bodies playing pretend to formulate this code that they can’t
even give it milk teeth.

The Mangan story neatly illustrates just
how an analyst who is not in the cheer squad can be frozen out. No-one is surprised
about this except, apparently, any company accused of doing such a thing and
the watchpuppies – otherwise you might think they would be forced to pretend to
tackle it in aid of “the free flow of information upon which market integrity
depends”.