ASIC widens probe into selective briefings
This builds on a surveillance campaign of analyst briefings for the coming earnings season after a series of briefings by gold miner Newcrest came into focus.
Newcrest's relationship with certain analysts has been under scrutiny after its share price fell by nearly 15 per cent in the 72 hours before a major restructure was announced. The company has long denied giving selective briefings.
In a speech on Wednesday night, ASIC commissioner John Price said the "confidential information project" would examine whether tougher penalties or more guidance were warranted.
"We will be speaking to accountants, investment banks, brokers and listed companies to understand how they handle confidential information prior to its announcement to the market," Mr Price told the Australasian Investor Relations Association. "We think it's important to address any perception about there being unfair differences in access to material information in our market".
He said it was essential that listed companies had in place proper systems for handling confidential information.
ASIC intended to "focus people's attentions on their existing legal obligations," and if the briefings uncovered evidence of "market abuse" the regulator would seek appropriate penalties.
"Let me be clear that the abuse of confidential information is market misconduct," Mr Price said. Anyone trading on confidential information could also be breaking insider trading rules, he added.
Several employees of large listed companies have said much more caution was being exercised when arranging interviews and information for public consumption.
Frequently Asked Questions about this Article…
ASIC's probe, called the 'confidential information project', is examining whether selective briefings and the handling of confidential information by big companies and market participants create unfair access to material information for some investors.
ASIC widened the inquiry to speak with accountants, investment banks, brokers and listed companies so it can understand how these parties handle confidential information before it is announced to the market and whether their practices create perceptions of unfair access.
ASIC's surveillance campaign built on attention around analyst briefings after gold miner Newcrest's share price fell by nearly 15% in the 72 hours before a major restructure announcement, prompting scrutiny of its relationship with certain analysts; Newcrest has denied giving selective briefings.
ASIC says it would focus attention on legal obligations and, where briefings uncover evidence of market abuse or trading on confidential information, seek appropriate penalties because the abuse of confidential information can amount to market misconduct and possible insider trading.
Listed companies should have proper systems and controls in place for handling confidential information, ensuring consistent processes for briefings and market announcements so they meet legal obligations and avoid perceptions of unfair information access.
ASIC's surveillance of analyst briefings ahead of the earnings season signals that companies and advisers may face closer scrutiny, which could lead to more cautious arrangements for interviews and information provided to analysts and brokers.
John Price warned that using confidential information inappropriately undermines market fairness; trading on such information can be both market misconduct and a breach of insider trading rules, exposing individuals and firms to regulatory action.
Watch for sudden, unexplained share moves ahead of announcements, unusual analyst coverage patterns, or reports of selective briefings. ASIC's inquiry is aimed at addressing these perceptions and enforcing rules to protect equal access to material information.
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