Following recent developments and public consultation, ASX published its revised Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 - 3.1B on 1 July 2015. The new guidance provides useful clarification (rather than a re-write of ASX’s fundamental position) on analyst and investor briefings, analyst forecasts, consensus estimates and earnings surprises.
On 1 July 2015, ASX issued its revised Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 - 3.1B (GN8).
GN8 was last updated in May 2013 but recent developments, including the issuance of ASIC’s report on the handling of confidential information (REP 393) and the $1.2 million penalty imposed by the Federal Court on Newcrest Mining for contravening its continuous disclosure obligations, have shown that listed entities and their advisers would benefit from further guidance on analyst and investor briefings, analyst forecasts, consensus estimates and earnings surprises. Some of the main changes to GN 8 include:
- clarifying the distinction between:
- a ‘market sensitive earnings surprise’ – that is, where an entity’s actual or projected earnings differ so significantly from market expectations that a reasonable person would expect information about its actual or projected earnings to have a material effect on the price or value of its securities; and
- the lesser ‘earnings surprise’ – that is, where an entity’s reported earnings differ from consensus estimates, but not necessarily to the extent that a reasonable person would expect the information to have a material effect on the price or value of its securities,
emphasising that only ‘market sensitive earnings surprises’ require disclosure under Listing Rule 3.1;
- emphasising that listed entities are under no obligation, whether under the ASX Listing Rules or otherwise, to correct the earnings forecast of any individual analyst, or the consensus estimate of any individual market data vendor, to bring it in line with the entity’s internal earnings projections; and
- adding new sections ‘Publishing analyst forecasts or consensus estimates generally’ and ‘Publishing analyst forecasts or consensus estimates to analysts’ which will give detailed explanation on information that should or shouldn’t be disclosed in relation to analysts’ forecasts.
While the changes do not change the ASX’s position, they provide useful guidance for ensuring compliance with the continuous disclosure regime.