Australia: ASIC's report card on handling confidential information - 'could do better'

Following the selective briefing of analysts by Newcrest in mid-2013, ASIC announced that it would sit in on communications between companies and analysts during the next reporting season.  Armed with the output of that survey, as well as interviews of listed entities and their advisers engaged in corporate transactions, ASIC has now issued its report on Australian market practice in handling confidential market-sensitive information.  Issuers, analysts and investment banks in the UK will read the findings with some interest, not least since the FCA is launching a thematic review into investment banks' controls in respect of inside information this year.

In short, the report card that ASIC gave all participants – listed entities, analysts and advisers – was “could do better”.

Analysts briefings

ASIC concludes that there is a range of practice – from “adequate” to “good” – in the briefing of analysts.  ASIC does not see a need for enhanced market guidance.  Rather, ASIC thinks everybody should comply more closely with existing ASIC and industry guidance.

ASIC recognises that it is important for listed entities to actively engage with shareholders and the investment community.  However, ASIC emphasises that everyone involved in these briefings needs to be aware of the risks.  

ASIC observed that the small to mid-cap listed entities often did not have specific policies in place, and relied heavily on advisers to guide them on how to manage their confidential, market-sensitive information.

Whilst everyone adhered to a ‘need to know’ principle to limit ‘insiders’, ASIC observed that there were generally larger teams of ‘insiders’ within investment banks.  ASIC indicated that this requires more robust systems to maintain confidentiality.

ASIC noted that none of the listed entities or advisers had a documented leak investigation policy, notwithstanding this is encouraged by the relevant industry guidelines.

Despite  advisers having policies not to speak to the media without client consent, ASIC’s media survey suggests this is not always working in practice.

ASIC expressly noted concern with the timing and number of soundings conducted by investment banks and brokers before either the announcement of the transaction or a trading halt.  Clearly this will be an ongoing area of ASIC attention.

ASIC reiterates guidance

ASIC reiterated the current guidance for handling confidential, market-sensitive information, in particular:

(1) listed entities

• ensure their policies are well understood and consistently followed;
• be vigilant about the information disclosed at analyst and investor briefings;
• refrain from trying to manage or correct market expectations through selective briefings;
• making access to analyst and investor briefings as broad as possible, including via webcasts, podcasts and/or publishing transcripts;
• preparing draft leak announcements and request for trading halts;
• having frank discussions with advisers about if and when soundings should be conducted about capital raisings and how many investors may need to be sounded, as well as considering trading halts to manage the risks associated with soundings.

(2) analysts and investors participating in briefings

• know and comply with the relevant good practice guidance on briefings;
• do not attempt to elicit confidential, market-sensitive information or other information that does not comply with industry codes from listed entities;
• if they suspect they may have been given confidential, market-sensitive information to inform compliance teams immediately and not pass information on.

(3) advisers

• ensure that the entity is aware of and comfortable with any release of any confidential, market-sensitive information;
• be mindful of the balance between the benefits to underwriters of soundings and the potential harm to listed entities and the market of leaked information;
• observe good practice guidance on handling confidential, market-sensitive information;
• implement appropriate IT controls to manage access to confidential, market-sensitive information.