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By Chris Vellacott
LONDON, April 12 (Reuters) - British investors have calledupon investment banks to stick closer to lock-up agreements onsales of company shares after a major transaction, saying itwould ensure more stable markets.
The Association of British Insurers (ABI) - whose membersmanage assets worth a quarter of the UK economy - has released aset of 'best practice' guidelines demanding bankers are clearerabout how much time will pass before they launch furtherplacings of shares.
The call comes as frustration mounts among investors over anincreasingly common disregard for lock-ups designed to prevent aselling shareholder, such as a private equity group,destabilising the market.
The lock-ups are meant to reassure investors buying into ashare sale that the seller will not dump more of their stake onthe market shortly afterwards, driving down the share price.
"It comes down to no more than we think it is important thatlock-up agreements frankly do what they say on the tin," RobertHingley, Director of Investment Affairs at the ABI, told Reuterson Friday.
"This is important because (lock-ups) are designed toregulate the balance between supply and demand and send a signalto the market that if you buy shares now there won't be afurther increase in supply for a given period."
The ABI does not have a regulator's powers to set rules butits views are important because of the buying power of itsmembers who represent much of the UK mutual funds market,managing nearly $3 trillion of assets.
Some investors were angered in 2013 when Lloyds BankingGroup, in transactions run by bookrunner Bank ofAmerica Merrill Lynch, sold two tranches of shares inwealth manager St James Place in quick succession.
The second sale came just over 10 weeks after the first,even though Lloyds had said it would not reduce its stakefurther for at least a year.
The ABI wants lock-up agreements to specify an initial"hard" lock-up that cannot be waived after which the termsbecome more flexible.
"You don't want to necessarily set a cliff edge in themarket because otherwise you get funny things happening aroundthat cliff edge. Some discretion is fine. But if you are goingto have 180 days, the first 150 days should be hard and then youcan waive in the last 30," Hingley said.
He said the ABI had made investment banks aware of itsdemands and received mixed responses.
"We have been in touch with a number of investment banks fora while, Some are sympathetic. Some are less so," he said. (Reporting by Chris Vellacott; editing by Tom Pfeiffer)
