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Analyst briefings
The leakage of material information about a listed entity ahead of a market announcement threatens market integrity. John Price, Commissioner
This article was submitted to the Governance Institute for publication in the Governance Directions magazine in April 2014 The leakage of material information about a listed entity ahead of a market announcement threatens market integrity by allowing selective access to information and increasing the risk of insider trading.
As such, it is vital that companies are aware of their responsibilities under the Corporations Act 2001, the ASX Listing Rules, and best practice guidelines.
ASIC has recently focused on this area through a number of streams of work. Namely through examining analyst and investor briefings by listed companies, the prevalence of leaks of confidential information, and the current market practices around unannounced corporate transactions.
ASIC recognises that analyst and institutional investor briefings can provide a useful supplement to formal market announcements and can improve the flow of information between listed companies, investors and analysts. However, we also believe briefings (whether formal or informal) can be a material risk area for selective disclosure of price-sensitive information.
A particular issue of concern is attempts by listed companies to manage broker consensus or market expectations through selective analyst briefings. If market expectations diverge in a material way from the company’s internal forecasts, it is not acceptable to just conduct selective briefings to try and bring the analysts ‘in line’ with the company’s views. Instead the company needs to consider making a market announcement.
More generally, board members and officers of listed companies should familiarise themselves with the food practice guidelines in this area and ensure that their staff receive appropriate training. Written policies should be in place to ensure appropriate conduct when conducting briefings and handling confidential information, and companies should monitor whether these policies are followed on a consistent basis.
In particular, we recommend companies:
be vigilant about what information is disclosed at analyst or investor briefings
refrain from trying to manage or correct market expectations through selective briefings
make access to any analyst and investor briefings as broad as possible including through making webcasts, podcasts and transcripts available.
ASIC, ASX and industry bodies have released best practice guidance in this area and the broader area of handling confidential information. The challenge for listed companies is to implement guidance in a consistent manner and approach issues with a view to follow the spirit underlying the guidance.
ASIC intends to continue its focus on this area in the coming months through targeted surveillance and enforcement campaigns. We will also release a report on handling confidential information more generally and what we have observed to date. John Price is a commissioner with the Australian Securities and Investments Commission.
XST Price at posting:
1.2¢ Sentiment: Buy Disclosure: Held
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