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Reporting issues with discount rates

Arbitrary manipulation of discount rates can ‘create’ reported capital, misleading prospective investors, creditors or policyholders.

Creation comes from use of discount rates in excess of the risk-free rate.

The use of discount rates that are in excess of risk-free rates is a pervasive issue that affects all firms with medium to long term debt, often with a material impact on the accounts.

This approach is rejected by all financial economists and has been raised as a serious concern by many stakeholders. 

FCA proposes a new category of authorised open ended fund called the long term asset fund (LTAF)

LIAS or LIARS?  Our view is that the proposals should be killed at birth.

The LTAF is designed to enable authorised funds to be set up to invest efficiently in long‑term, illiquid assets.

We believe the name ‘Long Term Asset Fund’ is an awful misnomer:

  • Suggesting that other funds are not long term.
  • Ignoring that these funds are partly invested in illiquid assets.
  • Providing false comfort by putting the word ‘Authorised’ in the title.

We think that the problem the FCA wants to solve is unclear.

Wiping out shareholders should not be the default option

Companies get into trouble for all sorts of reasons.  Shareholders have a duty of care to ensure the best possible outcome for all stakeholders.

When the shareholders, many of them retail shareholders, work with a company to find a win/win option, they should be able to rely on the Regulator to be consistent.  In this case, the FCA has been erratic. 

Mandatory climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships

Practical action or political stunt?

Follow this link to find out whether we think that the proposals will put Britain at the forefront of mandatory climate reporting or whether this looks more like a political stunt.

In March BEIS published a consultation paper on 'requiring mandatory climate-related financial disclosures by publicly quoted companies, large private companies and Limited Liability Partnerships (LLPs)'  

Archegos Capital Management’s meltdown raises serious concerns for private investors – Letter sent to Bank of England Governor

What has Archegos’ blight on Credit Suisse and five other non-UK banks got to do with UK shareholders?  If the same activity along with the same lack of transparency exists in the UK, UK banks could be greatly exposed without their shareholders and customers being any the wiser.

UKSA and ShareSoc have written to Bank of England Governor, Andrew Bailey, seeking assurance that the lack of transparency is being addressed in the UK surrounding large share trades by private offices and hedge funds executed through their prime brokers in derivative form.

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