Even for a deeply experienced watchdog and for a conspicuously successful company, an insider dealing probe would be a serious matter. Imagine then how much worse it is for the main players in the AMF inquiry into EADS. The French stock market regulator began work only in 2003, while the European aerospace group is a corporate convalescent.
EADS strongly denies the charges of misleading investors, as do its executives and shareholders. Only now that the AMF has detailed the accusations do they have the opportunity to defend themselves. But the inquiry has already hit EADS’ quest for business normality. At the very least, responding to the allegations distracts from the demanding operational task the group faces.
The inquiry has put the AMF at the centre of a storm about confidentiality after a summary of findings from its two-year investigation was posted on the internet. Though there is no proof that the AMF leaked the details, and though the watchdog is damaged by their appearance, the regulator is still being held responsible. Coming so soon after the Paris appeals court quashed the AMF’s ruling that Spanish company Sacyr Vallehermoso had to launch a cash bid for Eiffage because the watchdog had failed to follow the proper procedures, the episode has created an impression of an outfit that cannot manage its own processes.
This judgment is unfair. It is also unfortunate given a recent government-commissioned report into the judicial system. Noting the overlap between the AMF’s ability to investigate market abuse and the role of an investigating magistrate where insider dealing may amount to a criminal offence, the report suggested that control of some types of investigation might be removed from the AMF.
Diminishing the AMF would be a mistake. Though it has previously come under fire for being inflexible and inactive, over the past couple of years it has become more assertive. Meanwhile, some of its powers lag behind those of other financial watchdogs. Its ability to levy fines is puny against the penalties the US Securities and Exchange Commission can impose. Unlike the Financial Services Authority in London, it cannot act as a prosecutor where alleged insider dealing would be counted as a criminal offence.
The answer lies first with the AMF itself. It could use its current powers more flexibly to show that it is not a group of pen-pushers but a watchdog that really understands how business works. Then it would clearly merit – and should be given – a sharper set of teeth.