ASIC's disclosure failings over Newcrest

There’s a new instalment each day in the growing scandal over Newcrest and its alleged failure over disclosure and selective briefings.

But once again, the cone of silence has descended over the Australian Securities and Investment Commission.

As each day passes and with nary a squeak from the corporate regulator over the furore surrounding confidential leaks to analysts, another layer is stripped from the Australian market’s thinning veneer of integrity.

More than a fortnight has passed since Newcrest shares began to nose dive prompted, it appeared, from a series of analyst reports downgrading the gold miner’s prospects.

Three days later, the company duly informed the market of a massive earnings downgrade, asset write-downs, staff layoffs and the closure of its Brisbane office.

So, for the best part of a week, small investors were in the dark, adding to perceptions that the game is rigged in favour of the big boys, a perception given credence by the inaction and silence of the regulator.

Since then, a funds manager with vital information says he is waiting for an official call to provide evidence of what he was told. An analyst for a smaller firm is revealed as being briefed on revenue issues and other problems weeks before the market is informed. Newcrest has recalled a senior executive from North America to respond to the claims.

How do we know all this? Because it has appeared in the press. But nothing from ASIC or its chief Greg Medcraft. It apparently confirmed to reporters that it is talking to the ASX about the issue. Of the 18 announcements so far this month, there’s been nothing on Newcrest.

Elsewhere there are calls for a tightening of continuous disclosure rules. But there is nothing lacking in the rules. They are absolutely clear. The lacking is in the enforcement.

Even in the rare instances where action has been taken – such as with the Commonwealth Bank’s 2008 delay in informing investors of a rise in doubtful debts and with Leighton’s three week delay in reporting losses of almost $1 billion – the penalty has been a slap over the wrist.

In both those cases, the companies accepted enforceable undertakings and fines of $100,000 for the CBA and $300,000 for Leighton.

The problem with enforceable undertakings, however, is that they explicitly absolve the firm from any admission of a breach of the law or of any liability. And the fines bear no relationship to the magnitude of the losses suffered by shareholders.

The failure to impose a legal resolution on offenders then undermines the potential for civil action from shareholders.

Still, it is better than doing nothing, saying nothing, and apparently taking an eon to listen to those desperately wanting to give information.