It seems likely that listed companies in Australia will
revisit their continuous disclosure policies, particularly in
relation to the conduct of their analyst and investor briefings, as
a result of ASIC's recent commencement of legal action against
Newcrest Mining in the Federal Court.
In an 'Agreed Statement of Facts and Admissions' made
jointly by ASIC and Newcrest and filed with the Court (and attached
to a settlement deed lodged with the ASX), Newcrest has admitted to
two "serious" contraventions of s674(2) of the
Corporations Act, which in effect imposes a statutory obligation on
such companies to comply with the continuous disclosure obligations
under the ASX Listing Rules.
The contraventions relate to certain selective analyst briefings
made by a Newcrest investor relations manager in 2013 on market
sensitive information (pertaining to total gold production and
capex information) before its disclosure to the market.
As is generally well known, ASX Listing Rule 3.1 requires that,
once a listed entity is or becomes aware of any information
concerning it that a reasonable person would expect to have a
material effect on the price or value of the entity's
securities, the entity must immediately tell the ASX that
information. The exceptions set out in Listing Rule 3.1A no longer
apply when information ceases to be confidential.
Companies found to be in breach of their disclosure obligations
may be subject to penalties of up to AUD$1 million (per
contravention). In the case of Newcrest, the joint application
submits to the Court that an aggregate penalty of $1.2 million is
appropriate given the size of the company, the volume of trading
for the relevant period and the potential impact of the integrity
of the market.
The news relating to Newcrest comes after ASIC released a report
in May this year reviewing the way in which listed entities and
their advisers handle confidential and market sensitive
information. ASIC's report was prepared after the regulator
attended a number of group, select and 'one on one'
briefings in the latter half of 2013 in addition to its ongoing
surveillance and investigative work on continuous disclosure and
insider trading issues.
In its report, ASIC made a number of recommendations for listed
entities, advisers and analysts which it points out are largely in
accordance with existing best practice guidance. For listed
entities, ASIC recommends:
Directors and officeholders should familiarise themselves with
the Governance Institute/AIRA guidelines (in addition to the ASX
Listing Rules and ASX Guidance Note 8 reissued in May 2013);
written disclosure policies should be in place to ensure as
broad as possible access to analyst and investor briefings (eg.
providing advanced notice and dial-in details of briefings to the
market, giving wide access to roadshow briefings, making available
recordings or transcripts of group briefings and having appropriate
compliance systems in place capable of handling confidential,
market sensitive information);
in the context of market sensitive information about corporate
transactions, companies should: obtain some form of assurance from
third parties that market sensitive information remains
confidential (eg. keeping record of the advisers and investors
approached, using a short confidentiality script before any
approach and, if appropriate, using a pro forma confidentiality
agreement); draft trading halts and announcements should be
prepared in advance to address any leaks; ensure they understand
the risks involved with soundings of investors (and how trading
halts or voluntary suspensions should be used to manage such
ASIC recommendations for analysts and advisers follow a similar
theme of education and understanding of the relevant law as well as
familiarity with the joint AIRA and Finsia guidelines (for analyst
briefings) and the AFMA guidelines (in the case of advisers and the
conduct and timing of soundings in relation to the launch of
While ASIC seems comfortable with existing guidance available to
listed entities, advisers and analysts, the regulator considers
analyst and investor briefings to be "a significant risk area
for selective disclosure of market sensitive information" and
clearly wishes to ensure that the guidance is complied with.
To that end, it has flagged its continued focus on such
briefings by undertaking enforcement action where necessary and
reviewing analyst research reports (where material changes are made
to their forecasts or recommendations).
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.
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