ASIC releases report on handling of confidential information (briefings and market soundings)

Key lessons for listed companies and market participants.

ASIC has released a report containing recommendations about the handling of confidential, market-sensitive information in the context of analyst briefings and unannounced, market-sensitive corporate transactions. The report follows a review by ASIC of market practice and builds on previous guidance provided by ASIC and key industry bodies.

ASIC’s recommendations are largely consistent with that guidance; the report puts listed companies, their advisers and analysts on notice about ASIC’s preparedness to take enforcement action where market-sensitive information is mishandled. It also reinforces the need for greater discipline in analyst/investor briefings and seeks to tighten up practices around market soundings.

Approach to market soundings

ASIC expressed concern at the timing and number of soundings being conducted prior to announcement of corporate transactions, identifying this as a “serious risk area for leaks and insider trading”.

ASIC’s recommendations to listed entities in relation to market soundings are:

Ensure advisers seek the consent of the listed entity before conducting soundings Undertake soundings "as early as four days" before an entity's securities are placed into trading halt
Have a process for verbal wall-crossing and follow up emails with pro forma scripts and emails in line with the AFMA guidelines Undertake soundings during trading rather than after market or during a halt*
Conduct soundings as close as reasonably practicable to the proposed launch of the transaction        
Conduct soundings of large numbers of investors
Be prepared for leaks about corporate transactions by having draft requests for trading halts and ASX announcements (ie a “leak strategy”). Consider developing leak and media policies          

* In practice, we expect that most (if not all) entities would be reluctant to utilise trading halts whilst market soundings are conducted, at least where the decision to go ahead with the transaction will depend on the outcome of those soundings. In recognition of this, ASIC suggests that if entities are not prepared to use a halt in this situation then soundings should be undertaken after market close the night prior to the proposed launch of the transaction.

Approach to analyst and investor briefings

ASIC has reinforced the importance of knowledge of, and compliance with, relevant good practice guidance on handling confidential, market-sensitive information and the importance of having written policies that are well understood and followed at the organisational level.

ASIC confirmed its existing guidance in ASIC Regulatory Guide 62 (Better Disclosure for Investors) and ASIC Regulatory Guide 79 (Research Report Providers: Improving quality of investment research) but made useful additional recommendations:

Have in place written briefing policies that are well understood and consistently followed   Try to manage or correct market expectations through selective briefings (if consensus forecasts are significantly out of line, then continuous disclosure may be necessary)
Make access to analyst and investor briefings as broad as possible, including through making webcasts, podcasts and/or transcripts available
  Suggest current projections are broadly incorrect; use the continuous disclosure regime to establish a range in which earnings are likely to fall
Restrict briefings during times of market sensitivity
  Deny or restrict access to information
Be vigilant about what information is disclosed at briefings, keep to public information
Confine comments on individual market analysts’ financial projections to errors in factual information and underlying assumptions
Institute processes for checking information disclosed and rectifying any inadvertent disclosure by making the information generally available    


ASIC's intended next steps

The key focus of ASIC's continued work in this area will be to:

  • monitor whether listed entities, advisors and analysts are implementing the existing best practice guidance provided by ASIC, ASX and industry bodies;
  • work with relevant industry bodies to improve guidance and best practice in analyst and investor briefings;
  • conduct targeted reviews of research reports by analysts, considering the information available to them at the time they make any material change in their forecasts or recommendations;
  • use the market surveillance system to detect leaks and any associated insider trading; and
  • take appropriate enforcement action concerning breaches of the continuous disclosure and insider trading laws.



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