Since its methodology was to sit in on briefings, it is perhaps
unsurprising that it found no evidence of selective disclosure at
Nevertheless, a parallel study of the financial press found that
leakage of confidential information is "significant".
Issues of concern
Despite the absence of a smoking gun, ASIC's report does
identify a number of issues in present practices:
staff below board and officer level who have discussions with
analysts (eg. during site visits to mines) may disclose
confidential information because they are not "adequately
aware of the obligations surrounding confidential, market sensitive
miners and explorers may feel obliged to keep analysts on side
by giving them information that doesn't comply with JORC or
listing rule requirements for reporting exploration results,
mineral resources and ore reserves;
small- to mid-caps did not have policies and procedures for
handling confidential information in relation to material
transactions, making them reliant on the advice of their
no companies or advisers had a documented leak investigation
few companies pre-prepare a draft ASX announcement to be used
in the event of a leak (a situation that ASIC describes as
concerning, given the listing rule requirement to disclose
information immediately once the confidentiality carve-out falls
market soundings before a capital raising are a particular area
of concern (see below).
The ASIC report raises a number of concerns about market
soundings in advance of a capital raisings.
These seem to stem from ASIC's observation that there was a
correlation between soundings and a fall in the company's share
price immediately before the raising was announced. Although it was
at pains to emphasise that this did not necessarily imply a causal
connection, the report lists a number of "concerning"
soundings' taking place while the company's shares are
still being traded;
relatively large numbers of investors being sounded out (in one
instance, more than 50);
reports that, although they may give their consent to
soundings, small- to mid-caps do not feel in a position to control
the number and manner of the soundings;
companies' being reluctant to request trading halts because
they fear the consequences of a failed capital raising.
The report concludes with a number of recommendations for
companies, analysts and advisers.
For companies, ASIC repeats its long-held belief that
information disclosed at briefings should be disseminated as widely
as possible and as quickly as possible. It also recommends that
get assurances from third parties (eg. advisers) that
market-sensitive information will be kept confidential;
record the names of advisers and investors who have been
approached in relation to a transaction;
use a script about confidentiality at the start of initial
have "frank discussions" with advisors about how many
investors will be sounded out (and when).
For their part, analysts should not attempt to elicit
information that doesn't comply with industry codes.
Finally, advisers should establish and maintain effective
Chinese Wall procedures, and have leak investigation policies.
ASIC will now conduct a targeted review of analysts'
reports. That will attempt to identify instances where a changed
recommendation is not attributable to publicly-available
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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