Another reporting season is nearly here, bringing with it the usual market disclosures and the subsequent investor and analyst briefings. ASIC's high profile proceedings against Newcrest Mining Limited last year, which saw it secure a significant $1.2M fine against Newcrest for breaches of Australia's continuous disclosure laws arising from selective investor briefings, are a cautionary tale for listed entities.
As the practice of having analyst briefings is clearly going to continue even in the wake of Newcrest, how can this be done in such a way that listed entities can ensure they do not breach the continuous disclosure laws?
According to Lander & Rogers Corporate Partner, Deanna Constable, the definition of market-sensitive information can be a bit of a grey area and calls for judgement. "Select briefings are not the place for making first-time announcements of market-sensitive information. But they are often sessions where management and investors/analysts drill down into the detail. In that microanalysis, and in the cut-and-thrust of Q&A, new information can emerge. This is where the risk lies," she said.
"ASIC now expects strict compliance with the continuous disclosure obligations and has shown increasing willingness to bring civil penalty actions - full blown pieces of litigation - for continuous disclosure breaches. With some wins under its belt, the ASIC capability review recently announced by the Assistant Treasurer The Hon Josh Frydenberg MP is unlikely to clip ASIC's wings in this regard."
Deanna said that while it is obviously not possible to entirely eliminate the risk of confidential, market sensitive information being disclosed (whether intentionally or inadvertently) at briefings, it was possible to manage the risk sensibly through internal governance measures. This included things like:
- having up to date written policies regarding investor/analyst briefings and ensuring that these are followed, regular training is conducted on them and any changes to the policies are communicated to staff;
- appointing a senior officer with responsibility for continuous disclosure compliance;
- appointing a single (or short-list of) spokesperson(s) for the company who are solely permitted to brief the market or sub-groups of it;
- specific pre-event training for spokespeople and others involved in the briefings, including on the entity's disclosure history to date;
- publication of new presentation or printed materials to the ASX prior to them being given to briefing participants, and ensuring that this information is published on the entity's website after the ASX has published and before the briefing; and
- having post-investor briefing procedures in place to take steps where it transpires material, non-public statements were made by the company, and to routinely capture and disseminate full transcripts or recordings of the briefings for public access.
"By their 'select' nature, investor and analyst briefings clearly expose listed entities to a higher risk of regulatory action. If you are going to have them at all - which is a real question to ask yourself - having good policies in place and regular review and training in respect of these policies is essential," Deanna said.
"With the reporting season almost upon us, it is timely to get the house in order. ASX's new guidance on analyst briefings, effective on 1 July 2015, is a good place to start."