UK Oil & Gas’ share price saga is just another symptom of Aim’s lack of regulation

Yesterday's revelation that UK Oil & Gas (UKOG) doesn’t yet have permission from the regulator to drill in the Gatwick area will revive the recent saga surrounding claims that there could be 100bn barrels of untapped oil resource in the Horse Hill area once more.

 

With this will, no doubt, come questions once more over whether regulation of the Aim market is too relaxed, and whether we need a more stringent system in place surrounding scenarios such as this, where investors pile into a stock after some ill-advised comments from a market participant.

 

David Lenigas’ initial comments that the Gatwick area was awash with oil spread like wildfire across online news sources and social media, causing UKOG's share price to jump from around 1.1p to a high of 4.4p, before dropping down to 2.25p after the more cautious press statement from that suggested Horse Hill "should not be considered as either contingent or prospective resources or reserves".

 

Given the speedy nature of online news and social media today, it is becoming increasingly difficult issue for issuers to keep track of and manage the online rumour mill, whether through blogs, tweets, bulletin boards, or other social media sites.  

 

Share prices (and investors) can be affected dramatically by online statements, and this is raising questions as to whether more controls need to be in place. The legal remedies in this situation are limited and lodging a complaint or removal request to the host website or ISP will take time to get results, by which time the information has already influenced the market.  Seeking injunctive relief is effectively locking the door after the horse has bolted. 

 

Ultimately, Aim has always been seen as a higher-risk market with a lighter-touch regulatory regime, and seasoned investors are well-versed in the risks they take on when they invest. But this freedom needs to be balanced alongside any attempts to give the regulators more power to intervene in this area or strengthen the legal system in relation to injunctions.