Companies have received an important reminder from Australia’s corporate regulator this morning on the rules around disclosure of market moving information.
Releasing its Report 393 – Handling of confidential information: Briefings and unannounced corporate transactions (REP393) – ASIC said that while the current system of continuous disclosure “ensures retail investors can be confident in the integrity of the market”, there was a warning that companies “should address any perception – real or otherwise – about unfairness in access to market-sensitive information”.
It is a topic that has long-vexed retail investors who often feel that bigger investors and fund managers get selective access to market sensitive information before the broader market is informed.
Ian Matheson, CEO of the Australian Investor Relations Association (AIRA), said in a statement on ASIC’s report:
We see this report as a call to action. Releasing these findings will highlight the need for listed entities and their advisors to have appropriate policies and procedures in place to handle confidentiality and to avoid selective or preferential disclosure of material price-sensitive information which is not in the market place at the time. We will encourage our corporate members to ensure that they develop and implement such written policies and practices.
It appears that ASIC holds the same view. After a review of “a limited number of listed entities and their advisers in order to consider the practices employed in the Australian market to handle and protect confidential, market-sensitive information” they have reiterated in the background to this REP393 review:
The leakage of market-sensitive information about a listed entity ahead of a market announcement threatens market integrity by creating selective access to information and increasing the risk of insider trading. It can also pose threats to the outcome of corporate transactions.
The full REP393 is worth a look for anyone interested in knowing, understanding and staying within the law on market disclosures. But what is remarkable about this review is it appears the briefings that ASIC attended, even though they found no “evidence of selective disclosure of confidential, market-sensitive information”, they did, however “… observe a range of practices by listed entities (from adequate to good practice) regarding the level of access granted to briefings for the wider market and also the broadcasting and transcription of briefings for public access.”
That is, ASIC seems concerned that even though (we assume) the companies knew ASIC was in the room, some practices were still only “adequate”.
ASIC goes one step further and says that outside the review it has observed breaches of the regulations where “a listed entity may have, either intentionally or inadvertently, disclosed confidential, market-sensitive information during an anlayst briefing or similar forum”.
What they highlight is that “some analysts and their firms did not understand or comply with their obligations and associated restrictions on the use of that information.”
The wash-up is that ASIC says its guidance the rules of the ASX and industry body are currently enough to safeguard market integrity. But ASIC says further that “the key focus for our continued work in this area is not more guidance but on assessing whether the challenge is being met and, if not, taking appropriate enforcement action”.
Corporate Australia – you have been warned.
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