Kazakhmys plc, a FTSE 100 company which mines copper in the Central Asian nation of Kazakhstan, failed to declare potentially key information about its shareholders and directors when it listed on the London Stock Exchange, thereby exposing investors to unquantifiable risk.
Global Witness's report shows that Kazakhmys plc's listing prospectus - the key document which investors rely on when a company lists on the stock exchange - omitted potentially vital information about the biographies of its senior managers. Global Witness's report also reveals discrepancies in the declarations of the company's shareholding structure.
The Financial Services Authority (FSA), which regulates the London market, refused to tell Global Witness what due diligence it had done on Kazakhmys on the grounds that it was "not in the public interest". Kazakhmys itself declined to answer individual questions raised by Global Witness but said there had been a "very rigorous and comprehensive" process to prepare for the listing, including "thorough due diligence."
This report raises serious concerns about London's "light-touch" market regulation and argues that it would be in the public interest for companies like Kazakhmys to be required to provide much more information to investors about political risk.
Global Witness is calling for wider reforms of stock market listing rules in the UK and other major securities markets, to create more transparency about the activities of oil and mining companies and ensure that investors have the full information they need to assess risk.
