Earlier this year the Australian Securities Exchange (the ASX) released a consultation paper on proposed changes to Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 – 3.1B (GN 8). We wrote a blog that explained the changes proposed by that consultation paper.
Now, the ASX has released a final updated version of GN 8, which took effect on 1 July 2015.
Who should be reading the new GN 8?
The ASX has released a variety of documentation to help explain changes it has made to the final GN 8.
They include an updated version of the Continuous Disclosure: Abridged Guide.
Demonstrating just how tricky entities and their advisers find the application of the continuous disclosure obligations under the listing rules, GN 8 is now 84 pages long. This length is in comparison to the more palatable 15 pages of the Abridged Guide.
As part of the consultation feedback to the proposed changes to GN 8, the Australian Institute of Company Directors (AICD) pointed out that the increasing volume of GN 8 ‘is of some concern as this may impact its usefulness as a guide.’ In response to the AICD’s concern, the ASX refers to the Abridged Guide and notes that:
- the Abridged Guide is targeted primarily at directors and senior managers of listed entities; versus
- GN 8 which is targeted primarily at company secretaries, investor relations professionals and legal advisors.
So, based on the ASX’s direction, directors and senior managers should be smiling at avoiding reading the tome that is GN 8…don’t worry we have read both documents.
What has changed?
Our previous article summarised the key changes in the updated GN 8.
The substance of those changes have not been modified by the final version and instead, the changes between the draft consultation version and the final version are mainly additional text to further explain the ASX’s approach to ‘Market sensitive earnings surprises’ at section 7.3 and ‘correcting analyst forecasts and consensus estimates’ in section 7.4.
The additions further explain:
- the ASX’s guidance on applying the materiality test that formerly appeared under the Australian Accounting Standards to determine wheter or not to update published earnings guidance;
- that its additional guidance on earnings surprises is not intended in ‘any way’ to discourage listed entities or their boards from issuing earnings guidance but is instead intended ‘to ensure that the market is kept properly informed if an entity’s actual or projected earnings differ materially from its guidance’; and
- that if an entity’s analysis of analyst forecasts or consensus estimates leads it to conclude that furthter information needs to be disclosed, a market announcement should be made instead of ‘selectively divulging’ information to analysts.
A new section 7.6 ‘Publishing analyst forecasts or consensus estimates to analysts’ has been included in the final version. This new section advises entities on how to avoid providing ‘de facto earnings guidance’ through providing analysts with information on their forecasts to increase the accuracy of the analysts’ reporting.
One noticeable omission between the final GN 8 and the consultation paper version is in section 7.7 ‘Analyst and investor briefings’. Previously, the ASX required that any new presentation provided to an analyst or investor briefing should be published on the ASX Markets Announcement Platform. In the final GN 8 the ASX recognises that an entity may give a series of analyst and investor briefings over a short period of time which contain materially the same information, aside from being tailored for the audience. ASX does not require ‘second and subsequent’ presentations to also be published on the ASX Markets Announcement Platform, as they are not ‘new’ presentations, unless they contain new market sensitive information.
Other points to note
In addition to the material new content referred to above, the final GN 8 also includes various other amendments to assist an entity to meet and understand its continuous disclosure obligations.
- content of announcement: if an announcement is to be made about the signing of a contract relating to a signficant acquisition, the announcement should include information about the parties to the contract;
- concept of confidentiality: the sharing of management accounts and internal budgets and forecasts (information prepared for management purposes), with bankers, insurers or rating agencies on a confidential basis won’t usually require disclosure of that information to the market; and
- new judicial guidance: Justice Perrem’s reasoning in the Federal Court decision Grant-Taylor v Babcock & Brown Limited (In Liquidation) 2015, in relation to the scope of the obligation to disclose information to the market under section 674(2) of the Corporations Act 2001 (Cth) in, is used in footnotes as guidance to clarify some key concepts such as the meaning of ‘commonly invest in securities’ regarding the test for determining whether information is market sensitive and requires disclosure, and ‘awareness’ of information.
All of these inclusions in the final GN 8 should provide assistance to any company secretary or legal adviser considering whether a new piece of information may be subject to the disclosure obligations under LR 3.1.
What does this mean for you?
ASIC’s recent announcement that Coal Fe Resources Ltd (now Aus Asia Minerals Ltd) has paid a $33,000 penalty after ASIC served an infringement notice for the company’s alleged failure to comply with continuous disclosure obligations is a reminder to all entities that ASIC is prepared to take action in the event that their continuous disclosure obligations are not met.
To avoid reputational damage and other penalties for non-compliance with Listing Rule 3.1, all entities should be reviewing their disclosure policies in light of the final GN 8.
Changes may be required, particularly if an entity has policies and procedures in place in relation to earnings guidance.
CompliSpace will update the disclosure policy for ASX-listed clients subscribing to the CompliSpace programs.