Most Read Contributor in New Zealand, September 2016
guidance note on continuous disclosure is directly relevant to
the increasing number of
New Zealand companies listed on both the ASX and the NZX and
also provides a useful supplement to the NZX guidelines on how to
manage earnings surprises and analyst meetings.
ASX draws on the recent Babcock & Brown litigation.
ASX notes that earnings expectations can be set by guidance
given by the issuer to the market, by analyst forecasts or by the
issuer's earnings results in the prior period.
An earnings surprise will become "material
information" requiring disclosure when it differs from
expectations by a significant degree – in general, a movement
of more than 10% from any earnings guidance published by the issuer
is presumed to be material. A movement of less than 5% is presumed
not to be material.
Correcting earnings forecasts of analysts may be appropriate in
some circumstances. ASX notes that in some cases there is nothing
wrong with having a conversation with an analyst to understand the
rationale for a forecast that differs significantly from the
issuer's own view or the consensus estimates – provided
no market sensitive information is divulged which is not also
released to the market.
Analyst and investor briefings
ASX confirms that market sensitive information must not be
disclosed at a briefing, unless and until it has first been
disclosed to ASX.
Prudent practice is to release any presentation materials
through ASX and on the issuer's website to reduce the risk of
being accused of inappropriate disclosure - especially if the
disclosed materials contain different or more up-to-date
information than has been released to the market.
The ASX guidance includes a couple of practical points of
clarification, confirming that:
a series of presentations to analysts and investors over a
short period containing materially the same information, but
tailored for each audience, will not be regarded as "new"
by ASX so will not need to be released to the market provided at
least one copy of the relevant presentation has been disclosed,
issuers should as a matter of practice conduct a review as soon
as practicable after an analyst or investor briefing, including any
questions asked, to make sure that no market sensitive information
has been disclosed inadvertently.
Relevance to NZX listed issuers
As we noted in our
Brief Counsel earlier this year on NZX's updated guidance
on continuous disclosure, the guidelines offered by the two
exchanges are broadly consistent but the ASX guidance is much more
detailed and, in our view, more helpful to market participants.
The latest ASX update has reinforced this trend. The ASX
commentary on earnings surprises and analyst briefings, for
example, runs to 11 pages against five paragraphs from the NZX.
So NZX listed issuers may find the ASX guidance a useful
reference point as we head into the reporting season for 30 June
Continuous disclosure fallout from the Babcock & Brown
The ASX revised guidance draws on the recent Grant-Taylor
v Babcock & Brown Limited (In Liquidation) Australian
Federal court decision which considered aspects of the Australian
statutory continuous disclosure regime in the context of litigation
arising from the collapse of Babcock & Brown after the GFC and
allegations of inadequate market disclosure.
Under the Australian Corporations Act, which has close parallels
with Part 5 of the Financial Markets Conduct Act, information is
"material" if it would, or would be likely to, influence
the decisions of persons who "commonly invest" in
Perram J usefully held that the test for determining materiality
"an objective test to be
applied at the time it is alleged the disclosure should have
occurred. This involves a survey of all of the available material
including, because they are part of the factual matrix, the views
of the company and individual investors whilst accepting, of
course, that those views cannot by themselves be
determinative....Despite this ex ante approach, it is nevertheless
permissible to examine how the market subsequently behaved when the
information was disclosed as a device for confirming the
correctness of a conclusion already reached".
He also stated that the class of persons who "commonly
invest" in listed securities is not directed to:
"self-funded retirees who,
from time to time, (perhaps between games of bingo) play the
Instead, it refers to persons with "a degree of
sophistication which might be expected from those who have more
than a passing or occasional interest in the activities of
securities exchanges". This does not mean professional
Our thanks to Philip Ascroft for writing this Brief
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The RBI, on March 31, 2016, has notified the Foreign Exchange Management (Establishment of a Branch office or a liaison office or a Project office or any other place of business) Regulations, 2016 in India...
The committee set up to draft a Code on Resolution of Financial Firms, by the Ministry of Finance, Government of India, on September 28, 2016, released a draft bill – The Financial Resolution and Deposit Insurance Bill, 2016...
The distressed assets situation in India has gradually worsened over the past few years. The stressed loans issue in banks has resulted from a combination of factors including :-
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).