Interesting few paragraphs of the practical application of ' Soft Regulation ' and how it should relate to Corporate Governance. There is a difference in my opinion which should be well understood by the ASX , that many of these smaller companies including the vast amount of small cap ' spec ' miners simply do not have the resources available to be in the position to ' catch all ' vagary's that may arise from time to time. The principle issue here is mainly with regards to the fairly aggressive and at times opportunistic - Everblu Capital , and the obvious distinction differential or lack thereof of the ' Chinese ' Wall between the advisory and the investment sides of their business.
With respect to HDY - I would simply say make your enquiry's sure - However in doing for God's Sake be quick about it in the interest of the market mechanism you are suppose to be supporting. .....and lastly please don't shoot the messenger in your fact finding , please explain processes.
With this in mind, I bring your attentions in particular to the third paragraph where I have highlighted in bold italic's the ' Accepted role' of the ASX and other possible outcomes of these processes. I think we can all agree that in this instance the worst outcomes are unlikely at this stage.....
III WHAT IS THE NATURE AND EFFECT OF SOFT REGULATION IN CORPORATE GOVERNANCE?
A The Nature of Soft Regulation in Corporate Governance
1 What is the Content of Soft Regulation?In August 2007, the Australian Securities Exchange (‘ASX’
released the second edition of the ASX Principles for listed companies.47 The ASX Principles define corporate governance as the system by which companies are directed and managed. It influences ‘how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised’.48 There are eight principles that a company should adopt and then report on in its annual report.49 Each principle is accompanied by best practice recommendations on the type of reporting required. Under ASX Listing Rule 4.10, companies must disclose in their annual report the extent to which they have followed each of the recommendations.50 They must also identify any recommendations that have not been followed and state reasons for this.51 The ASX describes this as the ‘if not, why not’ approach. The Listing Rules provide a disclosure obligation, but the governance principle is only a recommendation. The ASX states that ‘the best practice recommendations are not prescriptions. They are guidelines … aspirations of best practice for optimising corporate performance and accountability’.52 The only exceptions relate to audit and remuneration committees of the company board. Companies
2 How is Soft Regulation Created and by Whom? The ASX Principles are made by the ASX Corporate Governance Council, a body in which ‘ASX played a central role as instigator, facilitator, Chair and
leader’.58 Section 761A of the Corporations Act 2001 (Cth) (‘Corporations Act’
includes ‘any rules (however described) that are made by the operator of the market … and that deal with … (b) the activities or conduct of entities’ as listing rules. Any change in ASX Listing Rules requires ASIC notification,59 and is subject to Ministerial disallowance.60
3 How is Soft Regulation Supervised? All three of the ASX, the LSE, and the NYSE have been demutualised. Regardless, both the ASX and the NYSE, as self-regulatory bodies listed on their own exchange, still supervise compliance with their own Principles and listing regulations respectively. Questions have been raised as to whether conflicts of interest will undermine the regulatory side of ASX and NYSE’s dual roles as market operator and governance supervisor.67 ASX and NYSE have both attempted to separate the market and regulatory roles, but neither has escaped criticism about the vigour of their governance supervision. In both cases responsibility for supervision and enforcement of market abuse (insider trading etc) has been moved away, but in relation to corporate governance, the ASX and NYSE remain the supervisors. Since LSE demutualisation, the UK Listing Authority does some company monitoring, including of transparency and disclosure.68
What steps does ASX take to supervise the ASX Principles?69 ASX has company advisors, who review the annual governance disclosure of each company. If there are omissions (in the sense of not keeping the market informed) then ASX will ask the company to remedy the breach, usually requiring supplementary disclosure. ASX had, until 2010, published statistics about rates of disclosure compliance (including exception reporting) and failure to report at all.70 The rates of no reporting at all (and hence failure to comply with Listing Rule 4.10) for all entities range from 2 per cent (establish an audit committee) to 19 per cent (evaluation of senior executives). Rates of compliance for the top 200 entities are generally closer to 100 per cent.71 It is interesting to note that the
ASX is content to report these rates of non-compliance with its own Listing Rules amongst companies which remain listed, when it has other means of enforcement at its disposal. If the company does not respond to requests for supplementary disclosure, ASX may issue a rectification notice72 which is usually published on the ASX Market Announcements Platform, or more rarely, suspend trading.73 Very occasionally, if the ASX considers that governance disclosure is essentially fabricated or contains significant misleading or deceptive statements, it may refer the matter to ASIC for further investigation or prosecution.74 That the ASX prefers to supervise and not enforce is evident from the fact that as far as can be found, it has never used the provisions under section 793C of the Corporations Act to enforce its Listing Rules through court proceedings. Unlike the ASX, the NYSE mandates compliance with its corporate governance rules rather than merely requiring disclosure. If after review a company is non-compliant, the NYSE adds it to a ‘BC Indicator’ list, which it publishes, and removes the company only after it returns to compliance.75 The company may continue to trade while non-compliant, unless the failure is of a qualitative or quantitative continuing requirement76 designated as grounds for suspension or delisting. Failure to maintain a compliant audit committee is a failure of a continuing requirement77 that could lead to suspension or delisting78 – with other governance deficiencies the company may continue trading while on the ‘BC Indicator’ list.
