| Focus: | ASX revision of Guidance Note 8 |
| Services: | Commercial |
Introduction
Continuous disclosure is often a vexed issue for entities listed on ASX. It can be difficult to decide what, when and how to disclose to the market in accordance with Listing Rule 3.1. To help listed entities meet their obligations, the ASX has rewritten Guidance Note 8, and has also provided a summary - click here to view.
The Guidance Note is effective today, 1 May 2013.
Why has ASX revised Guidance Note 8?
ASX regards Listing Rule 3.1 as one of the most important Listing Rules, essential to maintaining fair and efficient markets. Guidance Note 8 has been revised to provide additional practical advice for listed entities, directors and their advisors on their continuous disclosure obligations.
Key changes
| Clarification of the meaning of "Immediate disclosure" |
The requirement that market sensitive information be disclosed "immediately" has not changed. However, what this means in practice is now clearer. ASX interprets "immediately" to mean "promptly and without delay". A listed entity must disclose market sensitive information to the market as quickly as it can in the circumstances and must not defer, postpone or put the disclosure off to a later time. This requires a listed entity to have effective systems in place to ensure that market sensitive information which comes into the possession of its officers is promptly analysed and, if it must be disclosed, that it is promptly given to ASX or a trading halt is requested. |
| Greater emphasis on trading halts |
ASX provides greater recognition to the role that trading halts can perform in signalling to the market that market sensitive information will be released. ASX emphasises the value of a trading halt in allowing an entity time to gain internal sign-off on significant announcements, or to properly assess the impact of new developments affecting the business. |
| Responding to market rumours and loss of confidentiality |
A listed entity should be prepared to deal with leaks and market speculation. Although it can rely on exceptions to disclosure for a confidential and incomplete matter (such as a transaction in the early stages of negotiation), it should monitor:
The entity should have a draft letter to ASX requesting a trading halt and a draft announcement about the negotiations ready to send to ASX to cater for the eventuality that the disclosure exception no longer applies. |
| Considering the expecations of the "reasonable person" |
One of the essential grounds for withholding disclosure is that a reasonable person would not expect it. The ASX considers that if information is confidential and falls within one of the specific exceptions in Listing Rule 3.1A.1 (such as information generated for internal management purposes), then it will normally also satisfy the "reasonable person" requirement. However in limited circumstances, a reasonable person would still expect disclosure – for example where entities "cherry pick" the news that they disclose (for example positive results in clinical trials, where there have also been negatives), and additional information must be disclosed to clarify the selective disclosure. |
| Minimising earnings surprises |
An entity must consider if it has a legal obligation to notify the market ahead of the release of formal financial reports where it becomes aware that its earnings will differ materially from market expectations. ASX confirms that the best guides for this purpose are:
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What does it mean?
The fundamentals of continuous disclosure remain – market sensitive information must be disclosed immediately and truthfully, subject to limited exceptions.
Listed entities should refresh their processes for:
- gathering information
- signing off on market disclosures
- using trading halts to manage the competing demands of quick disclosure and of ensuring that the disclosure is complete and truthful.
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.
