Following closely on the heels of the High Court’s recent decision in Forrest v ASIC, ASX announced on 17 October 2012 the release for consultation of a new draft Guidance Note 8 on continuous disclosure. Guidance Note 8 was last updated in June 2005.
The draft revisions to Guidance Note 8 seek to provide additional information and transparency in a number of areas.
Clarification that ‘immediately’ does not mean ‘instantaneously’
Currently Listing Rule 3.1 provides that market sensitive information must be disclosed to ASX immediately. ‘Immediately’ has previously been taken to mean ‘instantaneously’. Under the draft revisions, ASX’s view is that the requirement to release market sensitive information immediately is satisfied if the information is disclosed ‘promptly and without delay’.
While ASX recognises that the speed that notice can be given to the market will vary according to the circumstances, ASX continues to urge companies to promptly utilise a trading halt where market sensitive information cannot be released to the market immediately.
Incomplete proposals or negotiations
One of the exceptions to the requirement to immediately disclose information that may be market sensitive is an incomplete proposal or negotiation (listing rule 3.1A.1). ASX has given additional guidance around when a proposal or negotiation is incomplete.
- A proposal is incomplete unless and until the entity has adopted it and is committed to proceeding with it.
- Negotiations are incomplete unless and until the entity has entered into a legally binding agreement or the entity is committed to proceeding with the transaction being negotiated.
However, ASX specifically brings listed entities’ attention to the difference between the situation in which board approval is required for the entity to be committed to a market sensitive proposal, and where the entity is already committed to a market sensitive proposal and the board is simply noting the decision. The former situation will need to be announced immediately upon the board making the decision, and the latter will need to be announced immediately upon the entity becoming committed to proceeding with the proposal.
ASX has moved away from previous guidance in which an entity was expected to disclose a material difference in its earnings from earnings guidance previously given to the market, or where no guidance had been provided, from consensus analyst estimates or previous corresponding period results.
Entities will now need to consider whether a difference in its earnings will have a material effect on the price or value of an entity’s securities, and if so, provide disclosure to the market. This change (if adopted) will be particularly significant for companies that do not routinely give guidance to the market.
ASIC has welcomed ASX’s updated continuous disclosure rules and guidance and urged the business community to have their say on the proposed guidelines.
ASX will conduct a national roadshow for the listed community and will be undertaking consultation with key stakeholders over the coming months. Industry comments and feedback is sought on the consultation materials, with submissions due to ASX by Friday, 30 November 2012.