In order to provide listed entities with clearer and more comprehensive information to assist them in understanding and complying with their continuous disclosure obligations, on 17 October 2012 ASX released for public discussion a revised version of Listing Rules Guidance Note 8 (New Guidance Note). It is worth highlighting that the New Guidance Note does not fundamentally change ASX's approach to disclosure issues.
ASX is also proposing to make minor amendments to Listing Rules 3.1 and 3.1B. The most noteworthy amendment was proposed by ASIC, namely to reverse the order of the exceptions in Listing Rule 3.1A in order to de-emphasise the "reasonable person" test, which is now the last requirement on the list instead of the first, for information not to be immediately disclosed.
The New Guidance Note provides clearer and more comprehensive guidance in certain areas including:
- the test for determining the materiality of information: The New Guidance Note explains how ASX interprets and applies the test under section 677 of the Corporations Act 2001 (Cth) when determining market sensitivity of information for the purposes of the Listing Rules
- the meaning of "immediately": The New Guidance Note explains that "immediately" does not mean "instantaneously" but rather "promptly and without delay". It also sets out the factors listed below that ASX will take into consideration when assessing whether an entity has compiled with its disclosure obligations (ASX recognises that the speed with which an announcement is made to the market will vary, depending on the circumstances):
- where and when the information originated
- the forewarning (if any) the entity had of the information
- the amount and complexity of the information concerned
- the need in some cases to verify the accuracy or bona fides of the information
- the need in some cases to comply with specific legal or Listing Rule requirements (ie the requirement that the announcement relating to mining or oil and gas activities to comply with chapter five of the Listing Rules)
- the need in some cases for an announcement to be approved by the entity's board or disclosure committee.
- the use of trading halts to manage disclosure issues: ASX explains how trading halts can be used by listed entities to manage their continuous disclosure obligations and confirms ASX's current practice that they will grant a trading halt to an entity which notifies them that it requires more time to prepare and issue a market sensitive announcement
- practical hints to manage the need to disclose immediately: ASX has provided a list of steps that listed entities can use to assist in managing their disclosure obligations under Listing Rule 3.1
- application of the carve-outs to disclosure in LR 3.1A: ASX provides greater guidance on the requirements that need to be satisfied to utilise the exception from immediate disclosure in Listing Rule 3.1A. These include substantially more detailed information and guidance on what constitutes an incomplete proposal and negotiations, the requirement for confidentiality, and the "reasonable person" test.
In relation to the "reasonable person" test, ASX considers a reasonable person would not expect the following information to be disclosed under Listing Rule 3.1A.3:
- confidential information that an entity is planning to make a unilateral takeover bid for another entity; or
- confidential information that an entity has received an offer from another entity to enter into a control transaction; or
- confidential legal advice concerning litigation in which the entity is or could be involved.
- false markets: ASX provides further guidance as to what constitutes a false market for the purposes of Listing Rule 3.1B and outlines how ASX deals with specific situations where that rule is commonly invoked
- specific disclosure issues: The New Guidance Note gives more detailed guidance on how entities should deal with "earnings surprises". In addition, it briefly touches upon exploration and production targets in relation to mining activities reporting.
In addition, ASX is proposing to issue a guide entitled "Continuous Disclosure: An Abridged Guide" – a summary of the key issues and obligations for directors and other officers of listed entities which has been specifically drafted (less technical) to assist them, rather than their legal and professional advisers.
Submissions to ASX on the consultation materials are due by Friday 30 November 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.