A moment of clarity: ASX releases proposed revisions to continuous disclosure guidance note

CORPORATE UPDATE (AUSTRALIA)

Following the High Court's recent decision in Forrest v ASIC; Fortescue Metals Group Ltd v ASIC [2012] HCA 39, the Australian Securities Exchange (ASX) this week released its much anticipated draft Guidance Note 8 on continuous disclosure for listed entities (GN8) for consultation. The guidance indicates a commercially realistic approach to how entities should comply with their obligations under Listing Rule 3.1 and provides a useful insight into how ASX will monitor and enforce compliance with the Rule. GN8 runs to 69 pages and ASX has also released an abridged guide of 13 pages.

Key points arising from the revised guidance are ASX's understanding that in some circumstances entities may need time to assess information before announcing it and its encouragement for entities to use trading halts to assist in managing their continuous disclosure obligations.

Listing Rule 3.1

There is no significant change in principle to the disclosure obligations in Listing Rules 3.1, 3.1A and 3.1B, although ASX proposes minor drafting changes. The key benefits of the review are the elaboration of the ASX's interpretation and policy, and the more detailed examples provided in GN8.

Key messages of GN8

Some of the key messages of GN8 are outlined below.

Test for 'material effect'

ASX acknowledged the difficulty in determining whether information is market-sensitive. The relevant test, laid down in the Corporations Act 2001 (Cth) (the Act), is whether the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of securities.

However ASX states that only the entity can form this view about the information it knows. It suggests that officers consider whether the information would influence their decision to buy or sell securities in the entity at their current price, and whether they would feel exposed to an action for insider trading if the information is not disclosed. It also emphasises the need to consider the information in the context of the entity's circumstances at the time, publicly available information and previous disclosures the entity has made.

Meaning of 'immediately' and use of trading halts

GN8 states ASX's view that 'immediately' does not mean 'instantaneous', but rather, 'promptly and without delay'. However the actual wording of Listing Rule 3.1 remains unchanged. While we consider the terms 'promptly', 'without delay', 'immediate' and...