The Italian Stock Exchange is losing appeal for many reasons but also because the poor legal protection of investors increases distrust

It can still attract the Italian stock exchange? On a general level it is worth noting that the stock exchanges are partly losing their main function is capitalize the company; other functions are accentuated. Companies have less need to invest in tangible assets; they make use of the division of labor by using the external contribution of third parties; often the same premises are rented. The value of the company is increasingly in the income due to the innovation capacity of higher level personnel, with costs recorded in the income statement. Liquidity is mainly self-generated or obtained from loans, often short-term. The quotation It serves the first partners to monetize the investment and to distribute the ownership in the control of the company; it serves less to raise investment capital, which reflects the balance sheet.

The Role of Investors and the Return of Shares

We explain the widespread restitution to members through thepurchase of own shares. This results in less incentive for quotations: we find very important companies not interested in listing (the recent delisting of Società Apparecchi Elettrici e Scientifici Saes; Ferrero).

Investors, on the other hand, are increasingly less individuals and more Investors institutional, with different objectives. At the extremes we find: those aiming for rapid, very rapid, negotiation; on the other hand, pension funds that invest in the duration, but which still exercise their evaluation on the company's performance through negotiation.

Italian Stock Exchange: A Market to be Renewed

This transformation in the function of listing may explain a reorganisation of the stock exchanges themselves, which sees trading concentrated on larger stock exchanges, adapted to the new conditions of the global financial economy: it is difficult for our stock exchange to compete.

There are more specific reasons that reduce theinterest to the listing on the Italian stock exchange. There are several and I will not examine them. But one is obvious, and it is fundamental. Overall, in our country, the discipline of civil liability of financial market operators has been weakening: it is lacking, deviant in essential points. In practice you invest without the protection of the Law, although the operations appear to be regulated, in truth too much so; but not on the essential point: to easily allow the exercise of liability action for violation of the rules.

Shareholders' expectations

Let's see quickly. Theshareholder widespread on the market, even when it invests through a manager, the latter when it acts in theinterest of the saver, is interested in: a) extensive, significant information, which can be understood also with the help of the specialized press; b) truthfulness of the same information, guaranteed by the responsibility of a third party auditor; c) availing of liability actions, especially for conflicts of interest. The discontent that is revealed in the sale of securities also requires liability action for misinformation; action that in any case becomes necessary for extreme cases.

The need for greater transparency and accountability

The information at the expense of the listed companies is relevant and sufficiently extensive. Moreover, the judgment on its reliability on the part of the auditor remains tainted by our prevailing interpretation of his task. He should be charged with the task of taking on the responsibility of quality of accounts and the information as attested by him (certified, as it was said in the past legislation). With the consequence on the burden of proof of the diligence lent, in any case at the expense of the reviewer. Instead, it is argued that the auditor is diligent if he follows the disciplinary rules that regulate his profession, while it remains up to the person who brings the liability to demonstrate negligence: practically diabolical proof.

In other words, the performance of the auditor should be of result, except for the proof against him of events that have made the result impossible; it should not be an obligation of means, like that of the auditors. Only in this sense is the audit and its cost justified; it is not a professional judgment, but ataking responsability of the result accepted with the assignment, unless proven otherwise. (In my opinion, this is already the correct interpretation of Community and Italian law).

The Inconvenient Truth: Reforms and Accountability in Law

Le liability actions With regard to company representatives, actions for conflict of interest, in line with the so-called deregulation, have been greatly weakened, first of all in code civil: they are difficult to identify in their practical scope; they are confused. The discipline prior to the reform was more precise and certain. The special discipline for listed companies does not make civil liability the central point. Unlike what happened for banks following the recent community discipline and the implementation in Italy (we have no experience of it yet). In essence, the civil code is oriented towards suppress the risk for the administrators to be held accountable for the damages caused; the responsibility, as understood by the reform of the code, is not to react to the "alarm bells", not to look for the "alarms": in this way the administrators are useless.

The limits of procedural mechanisms

I mechanisms procedural inefficient aggravate the problems. It is clear that the civil liability action, precisely the linchpin of the protection system, requires the adequate, rapid functioning of the process jurisdictional. Otherwise the protection of the Law itself weakens, and it remains entrusted to an administration that, by necessity, becomes overabundant. task of the administration ends up being a substitute for legal actions; it should instead be based on these, to facilitate their actionability by interested parties: a tool for controlling the effectiveness of the administration itself. The same judicial intervention for listed companies is distorted: we are witnessing a jurisdictional presence in emergency measures, in which the process then ends.

The challenges of legislation and listing

Instead i voting mechanisms in the assembly, in particular for the Appointment of directors, are not immediately perceivable for the purpose of proceeding to listing. Moreover, for the good conduct of the company, the old parameter of one vote per share is not to be disdained. However, even by multiplying the votes per share, the balance between power and vote must be respected, if one does not intend to make the joint-stock company a private foundation. The new institutional form (foundation) would require very different disciplines: I do not believe that this path is intended to be undertaken, although it has been started with the recent law.

Why does our legislation struggle to be essentially systematic? Why does it easily fall into particular interests that emerge from time to time, disturbing a system that should be designed to last over time and not to solve current, contingent problems?

The answer, which I will now limit myself to mentioning, is in the legislative procedure, very much so with us needy. I am very afraid that we are missing the train; missing theopportunity to adapt our stock exchange to the opportunities offered by the rapidly evolving European market.