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GRC Professional : GRC Winter 2012
IN DEPTH 18 GrC Professional • winter 2012 “IT’S THE VIBE, YOuR HONOuR.” So goes the oft-quoted line from the film The Castle, which invokes the concept of ‘the spirit’ if not the letter of the law. But recent investigations by ASIC are putting the foc us on continuous disclosure requi rement s, and their stance is much more black and white. In March this year Leighton Holding s was fined $300,000 for three breaches of the Cor porations Act 2001. Leighton was penalised for failing to release information in a timely fashion concerning profit losses in the wake of a downgrade. Leighton had arg ued that it did not have enough cert ainty on the scale of the downgrade to justify an an nouncement at the t ime. ASIC found there should have been im mediate disclosure in all three cases. In addition to the fine, the company has entered into a three-year enforceable undertaking to mon itor the company’s disclosure practices. More recently, the strange and unlikely takeover offer for David Jones by a uK private equity firm bring s continuous disclosure issues to the forefront once more. At issue in this case is what previously may have been seen as a technical share market r ule. under ASX List ing Rule 3.1, compan ie s a re bound to immediately inform the market once they become aware of any information which may have a mater ial effect on their share price. This rule is backed up by the Corporations Act 2001, which binds companies to disclose in accordance w ith the Listing Rules, and is enforced by ASIC. The is sue for com pan ies come s where there is a conflict between presenting timely information to the market and checking the validity of the information. In the David Jones case, the company r ightly held the infor mation while checking to see if the bid was realistic. under the Listing Rules, information that concerns an incomplete proposal or negotiation does not have to be released. Their hand was only forced when the information was rele ased on an a nony mous blog. Nonethele ss at the time of writing, ASIC has confirmed it will examine the now withdrawn $1.65 billion takeover bid by EB Private Equity. The recent James Hardie case has show n how misleading statements can lead to class actions. ASIC’s use of inf ri ngement not ices and en forceable under t akings could al so ex pose a more comprehensive understanding of continuous disclosure rules is certainly required by senior management and directors. Continuous disclosure under the spotlight After heavy penalties and an enforceable undertaking were brought down on Leighton Holdings, and questions surround the David Jones takeover bid, continuous disclosure is back on the agenda. By juLIAn FenwICK
GRC Autumn 2012
GRC Spring 2012