Australian Securities & Investments Commission bares its teeth on deal leaks

ASIC is concerned that deal leaks are undermining market integrity. While continuing to remind deal parties of their obligations, ASIC has upped the ante on enforcement, overtly signalling use of its notice and examination powers to identify leakers and enforce compliance. 

In brief

• ASIC has had enough of media reporting ahead of fundraising, merger and takeover activity, based on leaks.
• Consequently, ASIC has signalled to the market it is upping its compliance and enforcement measures.
• ASIC has reiterated its expectations of all market participants to take proactive steps to preserve market integrity.

Background

In recent Corporate Finance Updates, ASIC has issued a strong reminder to market participants of their obligation to manage the risk of leaks in the Australian deal landscape.

Concerned that leaks continue despite ASIC’s previous reminders, ASIC has now signalled it is moving into a compliance and enforcement phase – using ASIC’s tools such as notices to produce records and conducting examinations.

ASIC has noted its continued monitoring activity, particularly in circumstances where ASIC suspects confidential information has been leaked to the media.

What steps does ASIC expect?

ASIC requires corporate advisors and other market participants to have policies which include:

• implementing and maintaining effective information barriers;
• limiting access to information on a ‘need to know’ basis;
• effectively wall-crossing staff who are made aware of confidential information;
• maintaining insider lists;
• having appropriate restrictions on and monitoring personal account dealing; and
• effective oversight by a compliance or control function.

Similarly, ASIC has emphasised the need for listed entities involved in fundraising and control transactions to proactively manage information about the transaction. This includes:

• requiring consultants and contractors to enter Confidentiality Agreements;
• having arrangements to handle inside information on a ‘need-to-know’ basis;
• recording who has been provided with inside information and when; and
• actively monitoring and meeting continuous disclosure obligations. 

Broadly, entities must implement a formal leak policy outlining steps to prevent, monitor and react to any leaks of proposed transactions.

ASIC also expects advisors to listed entities, including lawyers and others working on transactions, to have “policies, procedures and appropriate controls to limit access to confidential information to only those who require it”.¹

ASIC enforcement processes are onerous, and best avoided by a wide berth. It’s a good time to take extra care to mitigate the risk of leaks.

1. ASIC Corporate Finance Update - Issue 15, December 2023.