The Bund Bull stands in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

MSCI Extends Review of Whether to Ban Multiple-Class Stocks

(Bloomberg) -- MSCI Inc., whose indexes guide the investment of about $11 trillion in assets, delayed a decision on whether companies that deprive public shareholders of voting rights should be barred from its benchmarks.

The company also broadened its investigation to consider “a discussion on the treatment of all types of unequal voting structures,” according to a statement Thursday.

Snap Inc., the parent of the Snapchat app for smartphones, kicked up controversy earlier this year when the shares it sold in its initial public offering conveyed no voting rights. S&P Dow Jones Indices and FTSE Russell -- two of MSCI’s competitors -- responded by saying companies that limited public voting rights wouldn’t be welcomed in some of their indexes.

But there was a backlash. BlackRock Inc., the world’s largest asset manager, said in October that investment returns for some of its clients could suffer as a result. BlackRock also said policy makers, not index compilers, should set equity investing and corporate governance standards.

In its statement Thursday, MSCI noted such concerns. MSCI has been reviewing what to do since June. During that process, a minority of firms that voiced opinions “were strongly against the exclusion of non-voting shares from equity benchmarks and expressed concerns that this would result in equity benchmarks that less clearly represent the overall opportunity set,” the New York-based company said.

Authorities in Hong Kong, Singapore and London are all considering changing their rules to allow irregular listing structures, as stock exchanges around the world battle for companies. In Hong Kong, a legislative committee overseeing the financial sector plans to question the exchange and regulator on how they will balance investor safeguards with the goal of attracting so-called new economy and technology companies.

Singapore’s exchange operator said last month it’s in no rush to make a decision on allowing dual-class shares, and is weighing “wide-ranging views” from a public consultation on the issue.

MSCI temporarily banned companies with “unequal voting structures” from being added to two broad benchmarks: the MSCI ACWI Investable Market Index and MSCI US Investable Market 2500 Index. Current members won’t be bumped from the indexes, however.

©2017 Bloomberg L.P.