In the second half of 2013, ASIC reviewed the conduct of a
number of listed companies and their advisers before the public
announcement of market-sensitive corporate deals. In particular,
ASIC focused on the measures taken to handle and protect
confidential, price-sensitive information in the context of analyst
briefings and unannounced, market-sensitive corporate
Based on its findings, ASIC did not feel it necessary to impose
new standards or introduce revised guidance. Rather, ASIC
reiterated the importance of adhering to the current market
Issues of concern
While ASIC found no evidence of selective disclosure during its
review, a parallel study of the financial media found that the
number of leaks in the media remains "significant".
ASIC observed that the small-to-mid-cap listed entities often
did not have specific policies in place for handling confidential,
price-sensitive information and that they rely heavily on advisers
to guide them on how to manage such information.
ASIC also noted that, on occasion, company employees sitting
below the board and officer level, who may not be adequately aware
of the obligations surrounding confidential, market-sensitive
information, have been involved in discussions with analysts.
While listed entities and their advisers all complied with the
"need to know" principle, ASIC noted that the number of
people who knew about a transaction was relatively high,
particularly within investment banks.
ASIC noted that none of the companies or advisers they reviewed
had a documented leak investigation policy in place and few
companies pre-drafted an ASX announcement to use in the event of a
ASIC expressly stated its concern with the timing and number of
soundings conducted by investment banks before either an
announcement or a trading halt. ASIC listed a number of
soundings taking place while the company's shares are still
relatively large numbers of investors being sounded out;
reports that, although they may give their consent to
soundings, small-to-mid-caps do not feel they had enough expertise
to influence the number and manner of soundings; and
companies being reluctant to place their securities into a
trading halt or suspension until they have certainty that the
capital raising will proceed
ASIC reiterated the following guidance that listed entities
should adhere to:
ensure that policies are well understood within the entity and
are consistently followed;
be vigilant about what information is disclosed at analyst and
refrain from trying to manage or correct market expectations
through selective briefings;
access to briefings by listed entities should be as broad as
possible (including via podcast, webcast and publishing transcripts
of the briefing);
prepare for leaks about corporate transactions by composing
draft requests for trading halts and draft ASX announcements;
have frank discussions with their advisers about if and when
soundings should be conducted about a capital raising and consider
using trading halts to manage the risks associated with
Analysts and institutional investors should:
know and comply with the relevant good practice guidance of
not elicit confidential market-sensitive information from
listed entities or other information that does not comply with the
industry codes from listed entities; and
know what to do if they suspect they may have been given
confidential, market-sensitive information
ASIC has indicated that, on the back of this report, it intends
to conduct a targeted review of research reports by analysts. This
review will attempt to identify circumstances in which changes in
research recommendations are based on non-public material
information that analysts may have received from listed entities
prior to any formal announcement.
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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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While the use of cash settled equity swaps is an established part of the Australian securities market, their use in recent high profile takeovers in Australia has attracted much attention. In particular, this attention has focused on the use of swaps by bidders or potential bidders in target companies without disclosure.
An AFSL is required if a person carries on a financial services business in Australia, unless an exemption applies.
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