Right to Seek Information
Timely and reliable information improves the ability of investors to better evaluate and judge the state of their investments – be they equities, exchange-traded derivatives or unit trust funds. What kind of information should the investor look for? And, where can they find such information?

Equities

One major problem of retail investors is that they do not know how to assess the merits and performance of public-listed companies (PLCs). The result of your assessment should tell you whether or not to invest, continue to invest or divest from the company.

For a start, you could take note of the following areas:
Core business(es) – The core business is what the company does best, and investors should recognise that the board or management should not go into new business ventures without careful evaluation of the company’s abilities and resources. Common sense prevails that new businesses should be synergistic with the core business.
   
Profile of directors and management committee – The role of directors is one of stewardship, where the board is responsible for approving the strategic plans and providing the strategic direction for the company’s growth. In addition to participation in the corporate decision-making process, the board is also responsible for ensuring that the business is being properly managed. Investors should, therefore, be satisfied that the directors and management are sufficiently competent to run and plan for the continued growth of the company’s business.
   
Corporate governance practices and internal controls – Business ethics plays a key role in the modern business environment, and good corporate governance practices instil investors’ confidence in the company. There should also be in place a sound system of internal controls to safeguard shareholders’ investment and the company’s assets. This involves identifying the principal risks along with the implementation of appropriate systems to manage these risks.
   

Financial data – Financial reports provide investors with some basis to understand and assess the company’s ability to generate profits and cash flows.

In addition to the annual report, the KLSE requires all listed companies to publish interim financial reports every three months. All material items are required to be reported in these interim accounts. Quarterly reporting is useful for investors who have suspicions about a company’s performance. Without quarterly reporting, companies can hide bad news for half a year or more.
   
Related-party transactions – While related-party transactions are not necessarily “evil”, prompt disclosure of such transactions would be one way to protect the company’s interests. Disclosure would allow shareholders to evaluate related-party transactions to ensure that such transactions are done on terms that are not more advantageous than if done on an arms-length basis.
   
Contingent liabilities – A contingent liability involves the potential loss arising from an uncertain future event. Disclosure of information about contingent liabilities would assist users of financial reports to assess the present and expected financial performance and financial position of a company.
 
| page 1 | 2 | 3 | 4 | 5 | 6 |