GILES RAFFERTY, Corporate Communication and Media Advisor.
The ASX is introducing a new “close review” procedure to scrutinise companies the ASX believes are not meeting disclosure obligations. The market operator intends to enforce a ‘close review’ when it has serious concerns about a company’s willingness or ability to comply with disclosure rules. The disclosure failings the ASX Is indicating would create serious concerns include a company:
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- being required to amend or withdraw an announcement prior to release,
- needing to clarify, correct or retract an announcement that has been released,
- refusing to clarify, correct or retract an announcement when asked to,
- issuing announcements that are not consistent with ASX’s guidance,
- failing to address issues with its disclosures raised by ASX,
- being uncooperative or difficult to contact about disclosure matters.
Forewarned is forearmed
The ASX will give a company the chance to address its concerns, in private, prior to initiating a “close review,” which would be enforced for an initial period of six months. If a company is still falling short of its disclosure obligations after six months the ASX can move to:
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- extend the close review period,
- demand additional remedial action by the company, and/or
- take any other enforcement action, including removal from the official list.
If the ASX does move to enforce a ‘close review period’ it will inform the market by making an ASX announcement using the company ASX code. The commencement of a close review procedure should be viewed by investors as an indication they should carefully assess any announcement made by the company under review. The launch of a ‘close review’ is not a guarantee that a company’s announcements will, thereafter, be complete, accurate and not misleading.
Rolling trading halts
If a company is the subject of a six month close review period, it should expect the additional scrutiny of market sensitive announcements will cause delays. The company will likely have to go into a trading halt until a market sensitive announcement is cleared for release. If the ASX has concerns with a market sensitive announcement, which are not quickly resolved, it will not hesitate to suspend trading in the company’s shares.
The close review period will not impact the release of periodic reports and administrative announcements but market sensitive announcements during the period will be subject to the following additional processes:
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- referral to ASX Compliance for review before release
- testing for compliance with the listing rules and consistency with applicable guidance
- ASX Compliance to decide on the market sensitivity of the announcement.
Removal from the official list
The purpose of this new procedure is to drive improvement in the entity’s disclosure practices. If a company does not improve, it may ultimately be asked to ‘show cause’ why it should not be removed from the official list.
With the ASX adopting a tougher stance on market sensitive disclosures it is increasingly important that companies have access to the best advice when composing ASX announcements. That advice will likely be sourced from some combination of the Company Secretary, Investor Relations and Corporate Communications functions. As an integrated IR agency, FIRST Advisers is well placed to add value and rigour to these functions and a company’s disclosure practices.