Recently, the Australian Financial Review reported that while the continuous disclosure regime has enhanced the disclosure of price-sensitive information, it has also contributed to greater share price volatility.

Companies ‘doing the right thing’ by reporting downward profit forecasts or, in fact, any news with a negative turn are seeing their share price take an immediate and sometimes drastic hit.

As CLERP 9 celebrates its first anniversary, it is timely to seek your views on how the regime is tracking in the ‘real world’ and how the reforms have affected disclosure practices.

1. Does your company have a formal written policy on the disclosure of information to the ASX and investors?

YES 89%
NO 11%

If so, has it been made public and available to shareholders?

YES 75%
NO 25%

Comment

No, we have Foreign Exempt status from ASX.

If not, does your company intend to draw up a written policy?

YES 20%
NO 60%
MAYBE 20%

2. Does your company have a dedicated Management Committee responsible for decisions about the company’s disclosures to the ASX?

YES 45%
NO 55%

If not, who is responsible?

Company Secretary 14%
Company Secretary & Investor Relations 6%
Managing Director/ CEO 11%
CFO 6%
General Counsel 3%
Company Secretary & CEO 29%
Board 11%
Other – please specify 20%

Comment

Co Sec, CEO & CFO
Managing Director/ CEO is decision-maker, but with assistance from Company Secretary, PR Manager and General Counsel
Yes — though it is very informal. Involves CEO, CFO, Co Sec, Investor Relations Manager, Public Affairs Manager and, if very material, final sign off from Chairman
Company Secretary & CEO, and board if necessary
Yes, we have nominated Disclosure Officers who make these decisions. These Disclosure Officers are the CEO, CFO, Group General Counsel & Company Secretary, Head of Investor Relations and Head of Media Relations. Subject to specific exemptions under our policy, all stock exchange announcements must be approved by 2 Disclosure Officers or I Disclosure Officer and a member of the Management Board
The CEO, General Counsel/Company Secretary prepare draft ASX disclosures for approval by the Chairman
Managing Director/ CEO and CFO in consultation with the board

3. Does your company have established policies and procedures for:

(a) Identifying price-sensitive information?

YES 74%
NO 26%

(b) Reporting price-sensitive information to the company officers responsible for disclosure matters?

YES 78%
NO 22%

(c) Educating and updating relevant managers and executives on the continuous disclosure rules and the liabilities for non-disclosure?

YES 59%
NO 41%

(d) Responding to queries and investigations from the ASX and ASIC?

YES 86%
NO 14%

(e) Responding to queries and speculation from the media?

YES 92%
NO 8%

(f) Responding to infringement notices from ASIC?

YES 57%
NO 43%

(g) Reviewing all aspects of the company’s continuous disclosure framework on at least an annual basis?

YES 73%
NO 27%

Comment

We do not have formal written policies but there are recognised procedures in place to cover all of the above. Simply it is ‘If concerned, get together CEO, CFO, Co Secretary and sort it out.
The areas above are covered through constant monitoring of information/ decisions by the Co Sec. Where necessary, information is passed to the board for consideration and action.
Yes. Set out in detail in the Continuous Disclosure Policy which all company employees/directors must comply with.

4. How many times in the past 12 months has your company received queries from ASX seeking statements to address media comment or market speculation about your company?

Number of times:

Nil 51%
1–5 49%
6–10
11–15
16–25
> 25

5. Do you think the current continuous disclosure rules are:

Restrictive 13%
Adequate 84%
Insufficient 3%

6. Do you think the continuous disclosure reforms introduced by CLERP 9 and the 2003 amendments to the ASX Listing Rules promote greater certainty in how the rules operate?

YES 31%
NO – there is now greater uncertainty 11%
NEUTRAL – the reforms have had no impact 57%

Why/ Why not?

Comment

The listing rules have always adequately mandated what is required re continuous disclosure.
So far our continuous disclosure practices have not had to change as a result.
Issue of speculation in the media can lead to queries by ASX and the carve-out under the listing rules may not be available. Also the proliferation of chat rooms and day traders has added to the complexity of providing meaningful information to the market.
Too restrictive.
The new rules were a useful clarification of how the existing regime operated.
By creating greater awareness of the obligations relating to continuous disclosure.
There is some positive benefit in terms of awareness about continuous disclosure and companies taking a cautious approach and being more inclined to disclose when there is any doubt as to whether they need to. However, the negative aspects are that at times companies disclose as a knee-jerk reaction and the market overreacts and this creates distortion in the market, whereas a more considered approach by the company to an issue with a fuller announcement may have be better.
There are more specific disclosure requirements and penalty regime, but the overriding principles of continuous disclosure are unchanged. For us, there has been little change to our disclosure, just a little more detail in some areas.
More black and white.
At least today there are clearer guidelines than in the past.
At the end of the day common sense should apply in determining what is or is not price-sensitive information.
Continuous disclosure obligations are the same.
Responding to speculation is unpredictable and dangerous.

7. Do you believe ASIC’s powers to issue infringement notices have changed continuous disclosure practices?

YES 26%
NO 74%

Why/ Why not?

Comment

It would create a level of discipline for those who up until now have not considered continuous disclosure so important.
There are companies that will always be reluctant to acknowledge when an issue needs disclosure due to competing vested interests and poor corporate governance compliance.
Too early to form an opinion.
We are yet to see if ASIC uses its new teeth with any effect.
To date there has been no discernable change; however, there remains a concern as to the attitude which may be adopted by ASIC in exercising the powers.
We had good policies and processes in place before the infringement notice regime and we continue to have good policies and processes.
Unsure.
I am not aware of any instances where this has occurred.
I don’t think there is much awareness of the infringement notices, and possibly there is some perception that it is simply a minor fine.
Not for the bigger companies who were mostly complying anyway.
We take an approach of complying with the spirit and intentions behind the continuous disclosure principles.
Too early to see examples of how ASIC uses this power.
Because new power; increased focus.
They are likely to encourage companies to take a more conservative approach to disclosure because of the potential for penalties to apply. The onus of proof is effectively shifted onto companies to prove to ASIC that they have complied with the continuous disclosure rules. It is also a concern that ASIC is the investigator, prosecutor and judge in connection with alleged CD offences. Given the often ambiguous nature and timing of disclosure decisions this is an unreasonable burden on companies.
At least the threat is there and that is a good thing.
You have to assume (and rightfully so) that the overwhelming majority of listed entities are aware of their obligations and will do what they can to fulfill these obligations. To think that the introduction of penalties, etc will increase compliance infers entities are looking for ways to avoid their responsibilities and only comply because of the threat of sanctions.
Not from our perspective but the threat of a fine may be making others take a more cautious approach to their responsibilities under the regime.
Taken more seriously.
Practices were already robust.

8. Do you think the current continuous disclosure regime has contributed to greater share price volatility?

Yes 43%
No 57%

If yes, what strategies are you using to manage the pricing impact of announcements on your company’s listed securities and why?

Do you draft conservative outlook statements? 23%
Do you refrain from reporting quantitative financial targets or profit forecasts? 33%
Do you provide only qualitative guidance of future performance? 37%
Other? 23%

Comment

No, except in case of earnings downgrades.
Unsure.
You would expect it to simply affect the timing of share price movements if financial performance is disclosed earlier. A greater influence is perhaps the short-term focus of analysts & investors, and in many cases their tendency to allow a movement in one indicator (either disclosed or publicly available) to move the share price, oblivious to what is happening at the time to other drivers of a company’s performance.
Provide a balanced disclosure statement to minimise the chance of overreaction.

Do you refrain from reporting quantitative financial targets or profit forecasts?

Generally, yes, but subject to our disclosure obligations in other jurisdictions where we have listed securities.