Welcomes Proxy Advisor Regulation
These much-needed rules are welcomed by companies such as iSignthis Ltd (ISX) because we have lived through the damage proxy advisers can cause to a company, its shareholders, staff and its investors.
The facts and timeline tell the story of ISX.
ISX was admitted to the S&P ASX300 index on 6th September of 2019.
Being admitted to that index was a great recognition of the work that had been done by the ISX team, but it was also a double-edged sword. What we now know is that our looming inclusion in that index had been noted by a number of sophisticated market players, who recognised that our shares would be available for lending, and as a result we would be a vulnerable target for a short-selling play.
In the weeks leading up to ISX being admitted to the ASX300 index, we had heard a few rumours that a "short report" on our company had been commissioned.
In hindsight, we should have paid more attention to those rumours. In turns out that, for some sophisticated players on Martin Place and Collins Street, we were the "Big Short" of 2019.
On September 10, just four days after we were admitted to the ASX300 index, a secretive report on our company was issued and selectively distributed by the proxy advisor Ownership Matters Pty Ltd.
Now, generally, proxy firms issue voting recommendations on resolutions that are raised for voting at company meetings.
Under the proposed changes, advisory firms will be forced to provide companies with their advice and research a week prior to their clients. This is to ensure that inaccuracies in reports are corrected.
But we think the changes need to go much further.
While firms such as Ownership Matters like to pitch their work and their recommendations as altruistic - and they are very good and working their media networks and briefing the media with their recommendations on votes - what is less known is that they also run a nice little sideline in "bespoke reports".
These are reports commissioned by a private third-party client on a company. To this day, we do not know who commissioned the Ownership Matters report into iSignthis. Someone however profited from it, to the expense of retail investors.
What we do know is that the report was riddled with factual errors, it was well briefed to the Australian media, and it has done considerable damage to the investment of more than 10,500 mainly mum and dad shareholders in our company. It was a deliberate, planned attack on the company and its mum and dad investors, by a proxy firm acting unethically, and well outside the bounds of proper ethics and governance.
That short report was circulated by Ownership Matters and it claimed, "ownership of shares by Directors was opaque". That was incorrect. The directors' holdings have always been transparent and fully disclosed to the market. It claimed that revenues were not met, in order to meet bonuses. Yet, ASIC had audited the company for the 2018 financial year as part of a random audit, and found no issues with revenue recognition. Neither had the Company's auditors.
The report raised a number of further so called "issues". Not a single issue of substance has been shown to have been accurate or backed by evidence.
Some of the allegations made in the media have since been settled as part of a defamation action against the Australian Financial Review, with an apology issued. Unfortunately, that apology is of scant value to our shareholders.
In the wake of the release of that Ownership Matters report, ISX shed close to $800 million of value in just two days, despite no news being released by the company to the market. More than 10,500 investors now own shares they cannot trade, despite the fact that the company remains profitable.
The ASX also latched onto this misleading and highly deceptive report as fact, and extensively quoted and relied upon it to suspend the company's securities from trading.
Some unanswered questions for Ownership Matters include:
*who commissioned the report on iSignthis?
*what was the rationale behind the report?
*how much was Ownership Matters paid for the report?
*if paid for, did Ownership Matters receive a commission from profits made by report recipients, or was it a flat fee?
*why was the report selectively distributed in secret, including to "short only" funds, but not released to the market as a whole?
*why wasn't the Company contacted for comment before selective distribution?
*why was the report not corrected, when iSignthis corrected the multitude of errors?
*did Ownership Matters consider the ethics and conflict of interest in producing proxy advisory reports for (long) holders, and this bespoke report for short sellers?
So, against that backdrop, we welcome the Federal Government's plan to regulate an industry that is in much need of regulation, and in our shareholders' experience can cause considerable damage to mum and dad shareholders by serving the interests of short-sellers and market vandals.
This announcement is authorised by N J (John) Karantzis, Managing Director, iSignthis Ltd.
About iSignthis Ltd
iSignthis Ltd (ASX:ISX) (FRA:TA8) is a hybrid monetary financial institution and also a RegTech leader in remote identity verification, payment authentication with deposit taking, transactional banking and payment processing capability. iSignthis provides an end-to-end on-boarding service for merchants, with a unified payment, electronic money and identity service via our Paydentity(TM) and ISXPay(R) solutions.
By converging payments and identity, iSignthis delivers regulatory compliance to an enhanced customer due diligence standard, offering global reach to any of the world's 4.2Bn 'bank verified' card or account holders, that can be remotely on-boarded to meet the Customer Due Diligence requirements of AML regulated merchants in as little as 3 to 5 minutes. Paydentity(TM) has now onboarded and verified more than 1.5m persons to an AML KYC standard.
iSignthis Paydentity(TM) service is the trusted back office solution for regulated entities, allowing merchants to stay ahead of the regulatory curve, and focus on growing their core business. iSignthis' subsidiary, iSignthis eMoney Ltd, trades as ISXPay(R), and is an EEA authorised eMoney Monetary Financial Institution, offering card acquiring in the EEA, and Australia.
ISXPay(R) is a principal member of Mastercard Inc, Diners, Discover, (China) Union Pay International and JCB International, an American Express aggregator, and provides merchants with access to payments via alternative methods including SEPA, Poli Payments, Sofort, PRZ24 and others.
Probanx Solutions Ltd, a wholly owned subsidiary of iSignthis Ltd, provides API based access to CORE Banking solutions, SEPA Core, SEPA Instant and SEPA business scheme, for neobanks, banks, credit unions and emoney institutions, and provides a bridge to the Eurosystem's Central Bank of Lithuania's CENTROLink service.