Welcome to Edition 131 of Boardroom Brief.

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

In this Edition, we consider Mergermarket’s recent report on global M&A activity, ASX’s final listing rule changes and ASIC’s comments on enforcement.

YOUR KEY BOARDROOM BRIEF

Mergermarket report on Q1-Q3 2019 global M&A activity. The report, which identifies key M&A geographic and sector trends, revealed that the slowdown in dealmaking spread to the US market in Q319, causing global M&A activity to drop 11.4% YTD on last year. European M&A is 29.4% lower compared to the same period last year, as a weakening European economy and geopolitical tensions continue to dampen activity. However, Mergermarket points to London Stock Exchange’s US$27 billion acquisition of US-based financial data provider Refinitiv (being the largest deal globally in 3Q19) as a sign of the strength of European outbound M&A, which at US $187.1 billion is up more than 20% on last year and at its highest YTD level since 2016.

ASX confirms final listing rule and guidance note changes. On 10 October 2019, ASX released its response to its 28 November 2018 consultation on proposed measures to simplify, clarify and enhance the integrity and efficiency of the ASX listing rules. 48 submissions (39 non-confidential and 9 confidential) were received; broadly supportive of the proposals. The new rules will apply from 1 December 2019 with two exceptions: (i) the exam requirement for persons responsible for communicating with ASX will only apply from 1 July 2020; and (ii) the new Appendix 4C and Appendix 5B quarterly cash flow reports will take effect for the quarter beginning 1 January 2020. The changes impact five key topics; namely (i) admissions (eg extension of good fame and character checks to the CEO, changes to the assets test and profits test requirements and escrow provisions); (ii) enhanced market integrity and disclosure requirements (including, eg, greater accountability for use of funds statements and expenditure programs and an exam for persons responsible for communicating with ASX); (iii) share issues; (iv) related party approvals; and (v) bolstering ASX’s compliance regime. Click here for the final changes ASX is making to its listing rules.  See the ASX public consultation page for mark-ups of the changes to the consultation and existing versions of the affected guidance notes and appendices.

ASIC reiterates its enforcement strategy. ASIC Commissioner John Price’s speech last week at an AICD event in Melbourne sought to clarify ASIC’s “why not litigate” enforcement stance (essentially echoing James Shipton’s opening at the ASIC Annual Forum in May). Mr Price reported that between July 2018 and June 2019 there had been: (i) a 20% increase in the number of ASIC enforcement investigations; (ii) a 51% increase in enforcement investigations involving Australia's largest financial institutions (or their officers or subsidiary companies); and (iii) a 216% increase in wealth management investigations. Of note to Directors, ASIC has repeated it does not intend to “litigate everything”. Litigation will focus on circumstances where the penalties are sufficiently grave and the conduct is sufficiently egregious — so companies in the midst of updating their processes across a number of fronts should prioritise closing identified compliance gaps attracting harsher penalties.

THE WEEK AHEAD

Banks in the firing line again. Australia’s banking sector will again be under scrutiny this week following the announcement by Treasurer Josh Frydenberg that he has commissioned the ACCC to undertake an inquiry into the pricing of residential mortgages. This follows the Big 4 Banks refusal to pass on the full amount of the last three RBA interest rate cuts.

Brexit update. All eyes will be on developments at the summit this Thursday/Friday; seen as the last chance for the UK and the EU to agree a deal ahead of the Brexit deadline on 31 October 2019. Messaging has been mixed on where deal discussions are at – but last week was wrapped up by “promising signals” an agreement wasn’t off the table.