Russian Issuers Spoil LSE's Face
More than half the Russian companies that launched GDR programs on the London Stock Exchange last year have a low level of internal control, according to the research of the Deloitte auditing firm. The auditor found that issuers from developing markets in general have little quality control, with Russian stock the worst. Thirteen Russian companies made up half of the foreign placements on the market last year, and seven of them “show as a risk factor possible problems connected with the organization of the process of preparing financial accounts,” said Deloitte partner Maxim Lyubomudrov.
Deloitte analyzed the prospectuses of 28 issuers from countries with developing market that had issued GRD worth £11.6 billion last year. Russian issuers VTB, Uralkaly, Sitronix, Polimetall, Pharmstandart, PIK, OGK-2, NMTP, LSR, Eurasia Drilling, AFI Development, Integra and MMK accounted for £7.46 billion of that amount.
The Daily Telegraph reported yesterday that the LSE disputed the auditor's findings. “The FSA [regulator Financial Services Authority] requires full disclosure of risk factors in the prospectuses of GDR issuers and guarantees that issuers fully observe the rules for listing,” LSE press secretary Catherine Mattison told Kommersant. LSE listers are subject to EU rules known as the Transparency Directive, which require them to file audited semiannual financial reports. Deloitte considers that insufficient, however.
The financial accountability of Russian companies on the LSE was a source of concern for investors a year ago as well. In April of last year, NYSE Euronext CEO John Thain expressed doubts about the corporate management, financial transparency and protection of minority shareholders' rights in many Russian companies. Now, the FSA may introduce new rules to make the difference between a primary listing and a GDR clearer in the next few months.
www.kommersant.com
All the Article in Russian as of Feb. 21, 2008
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