On 17 October 2012, the Australian Securities Exchange (ASX) released proposed changes to its continuous disclosure rules. The ASX has described the changes as the “single most important” guidance note revision the ASX has been working on in the past two years.

As part of the proposed changes, the ASX has released, for public consultation:

  • a proposed new version of Listing Rules Guidance Note Continuous Disclosure: Listing Rule 3.1 (New Guidance Note)
  • a new abridged guide on continuous disclosure targeted specifically at directors and other officers of listed entities, and
  • proposed minor changes to the disclosure provisions in the ASX Listing Rules (Listing Rules).

In conjunction with these releases, the ASX has also released a consultation paper on the proposals.

Rationale

It has been over seven years since the ASX’s current guidance note on continuous disclosure. In that time, the global financial crisis has tested equity markets and raised new disclosure issues.

The courts have also provided further guidance on continuous disclosure laws through their recent Fortescue Metals and James Hardie decisions. In addition, the Australian Securities and Investments Commission (ASIC) has provided further guidance on the operation of these laws through its enforcement activities, including by the issue of infringement notices for delays in disclosure. Such instances have highlighted to the ASX the merit of giving more detailed guidance on the continuous disclosure requirements.

What’s in the New Guidance Note?

The New Guidance Note provides significantly more guidance on how the ASX interprets and applies the continuous disclosure rules in Listing Rules 3.1 – 3.1B. In particular, there is detailed guidance on:

  • the test for determining whether or not information is “market sensitive” and therefore needs to be disclosed under Listing Rule 3.1
  • the meaning of “immediately” in Listing Rule 3.1, which requires that market sensitive information be disclosed to the ASX immediately upon the entity becoming aware of the information, unless it is exempt from the disclosure rules. The New Guidance Note clarifies that “immediately” does not mean “instantaneously”, but rather “promptly and without delay”
  • how trading halts should be used to provide entities with time to prepare and issue a market sensitive announcement, where the ASX considers the information is of a character that is likely to be market sensitive and warrant the grant of a trading halt
  • practical steps a listed entity can take to facilitate compliance with Listing Rule 3.1
  • appropriate headings and contents that should be contained in announcements. These guidelines are designed to ensure announcements made under Listing Rule 3.1 are accurate, complete and not misleading
  • the requirements that need to be satisfied to attract the exemption from immediate disclosure in Listing Rule 3.1A
  • what constitutes a false market (i.e. where there is material misinformation or materially incomplete information in the market) for the purposes of Listing Rule 3.1B and the ASX’s powers to correct or prevent a false market
  • specific disclosure issues such as how to provide earnings guidance. In addition, brief guidance is provided on the basis upon which exploration and production targets should be issued by mining or oil and gas entities. A proposed new Guidance Note 31, when released, will have further guidance on how to disclose exploration and production targets and financial forecasts which are based on such targets
  • the ASX’s enforcement practices
  • the operation of Listing Rule 3.1 through providing more detailed examples of how the principles in Annexure A of the New Guidance Note will be applied, and
  • linkages between Listing Rule 3.1 and the Corporations Act 2001 (Cth) (Act) and the compliance policies and procedures that listed entities should implement to comply with their obligations under Listing Rule 3.1 and section 674 of the Act. This guidance is detailed in the new Annexure B and Annexure C to the New Guidance Note.

In addition, the ASX is proposing to withdraw certain pieces of guidance in the current Guidance Note and in the notes to Listing Rule 3.1.

What are the proposed changes to the Listing Rules?

To accompany the New Guidance Note, the ASX has proposed minor changes to the continuous disclosure related provisions in the Listing Rules, including:

  • adding specific disclosure requirements in Chapter 3 for a listed entity to notify the ASX:
    • if it deactivates or reactivates a dividend or distribution plan
    • of the material terms of any employment, service or consultancy agreement it enters into with its chief executive officer or a director or any other person or entity who is a related party of the entity, and also of any variation to such an agreement
    • if it is established outside Australia, of any change to the law of its home jurisdiction of which it becomes aware that materially affects the rights or obligations of security holders, and
    • if it declares a dividend or distribution or makes a decision that a dividend or distribution will not be declared

and to provide a copy to the ASX of any document it gives to an overseas stock exchange that is to be made public

  • amending Listing Rule 1.10.1 to make it clear that Listing Rules 3.1A and 3.1B also apply to debt listings; and
  • other minor changes to the Listing Rules to correct drafting errors and clarify the ASX’s position to be in accordance with the New Guidance Note.

Where to from here?

Submissions in relation to the proposals close on 30 November 2012.

The ASX will then review the feedback received internally and with ASIC to determine whether it is appropriate to amend the New Guidance Note, the Abridged Guide and the proposed Listing Rule changes, before they are published in final form.

Subject to receiving the necessary Ministerial approval for the proposed Listing Rule changes, the ASX hopes to introduce the Listing Rule changes and to release the final version of the New Guidance Note and the Abridged Guide in the first quarter of 2013.

What do the changes mean for you?

The proposed new guidance on continuous disclosure provides ASX-listed entities with greater clarity on the continuous disclosure rules and greater transparency on the ASX’s approach to enforcing continuous disclosure rules. Listed entities should carefully consider the changes and put in place appropriate systems to ensure compliance with their disclosure obligations.