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GRC Professional : GRC Spring 2012
27 For brokers, I think the main challenge at the moment would be maintaining the compliance skills and resources needed to keep pace with new laws and increased regulatory expectations, in the face of the very difficult economic circumstances currently confronting the industry. In the case of David Jones, the timing of their disclosure was taken out of their hands by a leak. In those circumstances, DJs acted quite properly to issue an announcement in response to that leak. While some have said that its initial announcement could have been more detailed, that is judging the situation with the benefit of 20-20 hindsight. I think that on any fair reading of DJs' initial announcement, it had more than enough warnings to investors that they should be wary of trading off the back of that announcement. More generally, ASX is concer ned that potential takeover offers should not be announced prematurely because of their propensity to cause the market to move dramatically and in some cases inappropriately. Our new guidance note on continuous disclosure will provide some additional assistance on that topic. This year the ASX released an update to Guidance Note 9 Disclosure of Corporate Governance Practices. What impact is this expected to have on the corporate governance practices of listed companies? I think the standard of corporate governance across the spectrum of listed companies in Australia is generally good. To a large degree that can be attributed to a broad acceptance across corporate Australia of the ASX Corporate Governance Council's Principles and Recom mendations on Corporate Gover nance. Those Principles and Recommendations are underpinned by an ASX Listing Rule which requires listed entities to report against the recommendations on an "if not why not" basis -- that is, either adopt the recommendation or, if you don't, say so and explain why you haven't. The rule recognises that choosing not to adopt a recom mendation is a legitimate outcome provided you explain your reasoning to shareholders. Guidance Note 9 wasn't so much about changing governance practices but rather about giving better guidance to listed compa nies on how to comply with their "if not, why not" disclosure obligations under the Listing Rules. One of the concerns that many (including the Law Council) have identified about Australia's continuous disclosure framework is the exposure that listed entities and their directors have to class action litigants. Will the changes you are proposing to the rules and guidance in this area address these concerns? The framework for continuous disclosure sits partly in our listing rules and partly in the Corporations Act. The provisions that enable class action litigants to sue for losses they suffer from a continuous disclosure breach sit in the Corporations Act. It is not within ASX's power to change that Act. That is a matter for Parliament. Some, including the Law Council, have suggested that since the listing rules and the Corporations Act operate in tandem, it might be possible for ASX to modify its rules in a way that could alleviate what they see as some of the problems with the liability regime in the Corporations Act. However, any change to our listing rules is subject to ministerial disallowance. Since the minister rarely acts contrary to any advice he receives from ASIC in this arena, this effectively means that we can only change our listing rules if both the minister and ASIC agree to the change. The government and ASIC have made it plain that they see our continuous disclosure laws -- as currently framed in the listing rules and the Corporations Act -- as fundamentally underpinning the integrity of financial markets in Australia. I think it is highly unlikely therefore that the minister or ASIC will be amenable to any proposal from ASX or anyone else to change its rules in a manner that they would see as undermining or weakening those laws. X
GRC Winter 2012
GRC Summer 2013