How should ASX companies deal with social media disclosure?...ASX that listed companies should...
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www.carternewell. com © Carter Newell 2013 By Tony Stumm, Partner How should ASX companies deal with social media disclosure? Introduction Assume you are the CEO of an ASX listed company. You find out that one of your line managers inadvertently disclosed an outline of confidential negotiations (Project Noah) during an interview with a journalist. What do you do in terms of ASX disclosure? Problem analysis If we assume that the inadvertent disclosure was of price sensitive information, there is a problem. There is some chance that the information in question may not have attracted the journalist’s interest and is not published. However, if we assume the relevant information is published in a newspaper, journal or on a media company’s website, then the status of the information in question could become ‘generally available’. However, the fact that one journalist, outside of the ‘confidentiality circle’ was told price sensitive information (whether published or not) indicates that the ASX confidentiality exception applying to non- completed negotiations might no longer apply. So, in order to negate ASX disclosure under Listing Rule 3.1 (LR3.1) can the fact that Project Noah is still under negotiation (and not concluded), be relied upon so as to trigger one of the disclosure exemptions? No! Basically, confidentiality has been waived by the employee’s conduct, and the “under negotiation” non disclosure exemption doesn’t apply. The proper approach for the CEO is to make disclosure to the ASX of the incomplete negotiations on Project Noah as a result of inadvertent disclosure. This assumes the materiality of the transaction (Project Noah) could substantially impact on the company’s share price. However, this does not mean ‘full deal’ disclosure. Discussion Under the recently reviewed ASX Guidance Note 8, examples have been given to demonstrate an expectation on the part of the ASX that listed companies should screen media reports and monitor social media, on the basis that incorrect information uncovered should be assessed against the materiality obligations to make corrective disclosure. For the busy CEO, ASX has published “Continuous Disclosure: An Abridged Guide” which provides guidance to dealing with the complications of continuous disclosure. Self help solutions The majority of employees in an ASX listed company should have employment agreements. Typically, to cover the situation in the above hypothetical scenario, the employment agreement should contain wording: to oblige the employee to comply with reasonable directions given by senior management, for example, as to reporting information, or not to divulge information, outside directed policy criteria; and to retain the confidentiality of company information, so as to avoid embarrassment if it becomes necessary to make remedial ASX announcements as a consequence of compliance failures. Another tip, have a continuous disclosure policy or at least a protocol where personnel are advised about: reporting systems to be invoked where material share price information comes to their attention; communication authorisations, so that there is a clear and well understood hierarchy of persons authorised to talk to the media or analysts on behalf of the company; and decision making on the release of information to the ASX, with supplementary procedures to indicate the essence of speedy conveyance of information to decision makers so that they can make prompt decisions about the release or non release of that information. Prompt disclosure There has been a lot of commentary relating to the time frame over which sensitive share price information needs to be disclosed. Initially, the ASX considered that the disclosure requirement September September September September 2013 2013 2013 2013
Transcript of How should ASX companies deal with social media disclosure?...ASX that listed companies should...
www.carternewell.com © Carter Newell 2013
By Tony Stumm, Partner
How should ASX companies deal with social media disclosure?
Introduction
Assume you are the CEO of an ASX listed company. You find out that one of your line managers inadvertently disclosed an outline of confidential negotiations (Project Noah) during an interview with a journalist.
What do you do in terms of ASX disclosure?
Problem analysis
If we assume that the inadvertent disclosure was of price sensitive information, there is a problem. There is some chance that the information in question may not have attracted the journalist’s interest and is not published. However, if we assume the relevant information is published in a newspaper, journal or on a media company’s website, then the status of the information in question could become ‘generally available’. However, the fact that one journalist, outside of the ‘confidentiality circle’ was told price sensitive information (whether published or not) indicates that the ASX confidentiality exception applying to non-completed negotiations might no longer apply. So, in order to negate ASX disclosure under Listing Rule 3.1 (LR3.1) can the fact that Project Noah is still under negotiation (and not concluded), be relied upon so as to trigger one of the disclosure exemptions? No! Basically, confidentiality has been waived by the employee’s conduct, and the “under negotiation” non disclosure exemption doesn’t apply.
The proper approach for the CEO is to make disclosure to the ASX of the incomplete negotiations on Project Noah as a result of inadvertent disclosure. This assumes the materiality of the transaction (Project Noah) could substantially impact on the company’s share price. However, this does not mean ‘full deal’ disclosure.
Discussion
Under the recently reviewed ASX Guidance Note 8, examples have been given to demonstrate an expectation on the part of the ASX that listed companies should screen media reports and monitor social media, on the basis that incorrect information uncovered should be
assessed against the materiality obligations to make corrective disclosure.
For the busy CEO, ASX has published “Continuous Disclosure: An Abridged Guide” which provides guidance to dealing with the complications of continuous disclosure.
Self help solutions
The majority of employees in an ASX listed company should have employment agreements. Typically, to cover the situation in the above hypothetical scenario, the employment agreement should contain wording:
� to oblige the employee to comply with reasonable directions given by senior management, for example, as to reporting information, or not to divulge information, outside directed policy criteria; and
� to retain the confidentiality of company information, so as to avoid embarrassment if it becomes necessary to make remedial ASX announcements as a consequence of compliance failures.
Another tip, have a continuous disclosure policy or at least a protocol where personnel are advised about:
� reporting systems to be invoked where material share price information comes to their attention;
� communication authorisations, so that there is a clear and well understood hierarchy of persons authorised to talk to the media or analysts on behalf of the company; and
� decision making on the release of information to the ASX, with supplementary procedures to indicate the essence of speedy conveyance of information to decision makers so that they can make prompt decisions about the release or non release of that information.
Prompt disclosure
There has been a lot of commentary relating to the time frame over which sensitive share price information needs to be disclosed. Initially, the ASX considered that the disclosure requirement
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meant that ‘immediate disclosure’ should be interpreted as ‘instantaneous’. However, under the revised ASX Guidance Note 8, released in October 2012, this interpretation was re-expressed to mean ‘promptly, without delay’. This modified meaning suggests that there is intended to be more reflection time allowed on the analysis of the information (depending on its complexity) and a reasonable level of time allowed for Board review of the information and approval to the terms of the ASX announcement.
Analyst briefings
Many companies have been ‘wrong footed’ by having private analyst briefings without being aware that information disclosed at those briefings can constitute disclosable information.
Analyst briefings often comprise sessions where information previously disclosed to the ASX is repackaged or reformatted and where accentuation is given to some parts of the information without mention of qualifying factors. The easiest and most practical tip to cover this situation is to release the briefing notes or the PowerPoint presentation for an analyst briefing to the ASX, before the briefing is held.
Conclusion
If you are having problems determining how ASX Listing Rule 3.1 applies to your ASX listed company, refer to ASX Guidance Note 8 and to the examples given. Make sure your company has adequate systems, polices and a protocol for recovering possible disclosable information at the coal face and for identifying who makes initial decisions on whether the information is disclosable and how and when these decisions are implemented.
For further assistance, contact Partner Tony Stumm. Tony is an ex-ASIC regulator and has had extensive experience in advising clients on ASX disclosure.
Author
Tony Stumm Partner
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Upcoming Breakfast Seminar
Tony Stumm, Partner and Matt Couper, Special Counsel, will be presenting at the upcoming breakfast seminar 'Potential personal liability of directors when companies are under financial stress':
The seminar will cover topics such as:
� when directors can become personally liable for corporate insolvency
� recent developments in Director Penalty Notices
� why SMEs and public companies react so differently to approaching insolvency
� tips for advising SMEs on directors' duties during insolvency
� addressing any current reform proposals
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