ASX has issued revised guidance on continuous disclosure obligations

1 min  16.03.2018
Following recent disclosure issues, the Australian Securities Exchange (ASX) has issued revised guidance on meeting disclosure requirements under Listing Rule 3.1: Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 – 3.1B and has reminded entities of the possible consequences of failing to meet their obligations.

Issues with disclosure of customer contracts: The ASX writes that recently there have been a number of incidents where the disclosures by 'listed entities about their contractual arrangements with customers have fallen short of the required standards'.  The ASX cites a number of examples of this including entities:

  • 'announcing a contract with a major global customer without providing any details of the nature or substance of the contract or its significance to the entity (ie seeking to benefit from the association with the customer without providing proper disclosure);

  • announcing what appears to be a material customer contract without disclosing that it is subject to a trial period or other conditions and therefore may not proceed;

  • disclosing revenue projections for customer contracts that do not have a proper basis or that do not state the material assumptions or qualifications underpinning them;

  • not disclosing when a previously announced material customer contract is terminated or does not proceed (ie disclosing good news but not bad); and

  • misrepresenting customer contracts as being "material" or with other superlatives when plainly they are not (one of the more notable examples being a listed entity that disclosed a "material commercial agreement with a leading financial entity" under which it was to receive less than $1000 in revenue)'.

[Note: ASX does not name specific companies.  Examples of recent disclosure issues and subsequent trading halts at three small cap technology companies: GetSwift, Big Un and Buddy Platform were discussed in Governance News 26/02/2018]

Reminder of the possible consequences of failing to meet continuous disclosure obligations: ASX comments that when it detects the sort of behaviour identified above, it 'will not hesitate to suspend the entity, query it and require it to correct any inadequate or misleading disclosures. It will also refer the entity to ASIC for consideration of regulatory action'. 

Updates to Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 – 3.1B

Changes include:

  • Additional guidance in section 4.15 on ASX’s disclosure expectations for material contracts.

  • Expanding the guidance in section 5.10 to address the new insolvent trading safe harbour for directors in s588GA of the Corporations Act 2001 (Cth) and what should be disclosed when an entity in financial difficulties requests a voluntary suspension to complete a transaction necessary for its survival.

  • Removing a reference in section 4.20 to disclosing the impact of material contracts on revenue, costs or profits.

  • Clarification of the material in the worked example of the operation of listing rule 3.1 relating to mineral discovery (Changes to Example D of Annexure A). 

In light of recent disclosure issues, the ASX highlights the new passage in section 4.15 of the guidance note regarding the need to provide sufficiently detailed information for investors: 'Wherever possible, an announcement under Listing Rule 3.1 should contain sufficient detail for investors or their professional advisers to understand its ramifications and to assess its impact on the price or value of the entity’s securities' the ASX writes.

Other updates to the Listing Rule Guidance Notes

The ASX has also released updates to the following Listing Rule Guidance Notes:

  • Guidance Note 1 Applying for Admission – ASX Listings.  The ASX writes that changes include the addition of further materials in section 3.8 on using artificial means to achieve spread and in section 3.19 on ASX’s good fame and character requirements. 
  • Guidance Note 12 Significant Changes to Activities:  The ASX writes that the changes reflect a change in policy for back door listings (which is effective immediately) requiring all directors or proposed directors 'to provide evidence of their good fame and character, including existing directors who have been elected by shareholders to the board, and clarifying the accounts that need to be disclosed in an announcement under Annexure A to that Guidance Note'. 
  • Guidance Note 16 Trading Halts and Voluntary Suspensions Changes reflect changes to section 5.10 of Guidance Note 8. 

[Source: Listed@ASX – Compliance Update 02/18 March; Revisions to ASX Listing Rules Guidance Note 8]


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