Welcome to Edition 133 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 shareholder class actions, Australian fintech developments and ASIC’s efforts on cross-border benchmarking.
YOUR KEY BOARDROOM BRIEF
Might we see a rise in continuous disclosure class actions? The Federal Court’s decision last week that department store giant Myer had misled shareholders with an ‘inflated’ profit forecast for FY2015 highlights the importance of corrective statements to ensure ongoing compliance with continuous disclosure requirements. It was irrelevant that hard-edged scepticism of market analysts at the time had already deflated the then CEO’s comments about the company’s profit for that financial year and, had the appropriate updates been made, the market price would not likely have altered. Moreover, the Court found that shareholders affected by continuous disclosure breaches do not need to establish individual reliance. As the first-ever shareholder class action over a company’s failure to meet its continuous disclosure obligations to go to judgment instead of being settled, Directors can expect the findings to have ramifications for corporate Australia and future class action cases; with class action lawyers and funders now having a much clearer path to awards of damages of much greater magnitude. See G+T Insight article “Market-based causation gets the green light” for more discussion on the findings and implications for ASX listed entities.
Update on fintech efforts in Australia. ASIC Commissioner Cathie Armour’s speech last week at the China Financial Summit 2019 provides an overview on its activities to support fintech. Since ASIC’s launch of the ASIC Innovation Hub in early 2015 (which assists fintech and regtech start-ups), ASIC commenced this year a series of Regtech Initiative Events to test the latest regulatory compliance technologies and has increased its participation in international networks such as the Global Financial Innovation Network and the International Organization of Securities Commissions Fintech Network. Cyber-resilience assessments are noted as a key focus area of ASIC. Discussion of the Australian Government’s efforts also featured, namely its: (i) newly created parliamentary secretary position, Assistant Minister for Superannuation, Financial Services and Financial Technology; (ii) establishment last month of a Committee on Financial Technology and Regulatory Technology (charged with reporting in October 2020 on fintech and regtech opportunities, barriers to uptake of new technologies in the financial sector, global benchmarking and potential initiatives to strengthen fintech and regtech practices); and (iii) broader agenda to attract international innovators to the Australian market. Of note to Directors, ASIC made clear its view that Australia is on the cusp of a transformative ‘revolution’ of financial technology into mainstream Australian markets and it wants to see technology create better outcomes for both consumer and business.
ESMA and ASIC to co-operate on benchmarks. Last week, ASIC announced it has signed a memorandum of understanding (MoU) with the European Securities and Markets Authority (ESMA) setting out cooperation arrangements in respect of Australian benchmarks, which were recognised by the EU on 29 July 2019 as being subject to effective supervision and enforcement meaning benchmarks declared significant by ASIC – such as BBSW, S&P/ASX200, Bond Futures Settlement Price, CPI, and Cash Rate – can be used in the EU by EU-supervised entities. The ESMA-ASIC MoU sets out cooperation arrangements to complement the EU’s equivalence decision and facilitates information exchange and supervisory coordination. Benchmarks play a vital role in cross-border financial transactions and ASIC envisages the exchange of views and information under the MoA will assist ASIC to achieve its vision of a stronger and more efficient financial system in Australia.
THE WEEK AHEAD
Brexit – a new deal but another extension. The EU will announce this week the new deadline date for Brexit after UK Prime Minister Boris Johnson admitted the Government’s deadline to deliver Brexit by this Thursday can’t be met. Unsurprisingly, MPs insist on having longer to deliberate the new proposal before agreeing to it and the Government lacks a majority to push it through. MPs are expected today to consider Boris Johnson's call for an early general election on 12 December 2019 (already rejected twice) – but the chances of enough MPs backing the motion while “no-deal” remains a possibility is uncertain.