On Friday 11 May 2018, ASX released a compliance update which sets out that listed entities generally should not lodge a broker or analyst research report about the entity (Research Report) or an announcement referring to the release or contents of a Research Report for release on the ASX market announcements platform.
ASX’s previous policy allowed entities to release an announcement noting the publication of a Research Report, provided the contents of the Research Report were not contained in the announcement, the announcement did not contain a live link directly to the Research Report and the announcement noted whether the Company commissioned the Research Report.
This change in policy from ASX comes in response to recent instances where Research Reports have contained information such as exploration results, mineral resources, ore reserves, production targets and other forward looking statements that have not previously been disclosed to the market in compliance with the relevant regulatory requirements, such as the JORC Code 2012, Chapter 5 of the Listing Rules, ASIC Information Sheet 214 and ASIC Regulatory Guide 170 (dealing with prospective financial information). The publication of the offending Research Reports has in some instances, been referred to in ASX announcements.
The rationale behind the policy shift is that a Research Report should be based exclusively on information previously disclosed to the market and should not contain any new material information, and therefore its release should not be a material event. If an entity has reason to believe that a Research Report may be material, it may contact ASX to pre-clear an announcement referring to its release but will need to provide a detailed explanation of why it considers the Research Report to be material.
The compliance update and associated changes to ASX Guidance Note 8 do not preclude listed entities from uploading Research Reports to their website, however, entities wishing to do so must be careful not to endorse the contents of the Research Report, such as statements of opinion and price targets. Entities must also set out the nature of any commercial relationship with the broker or analyst preparing the Research Report.
In addition, entities must ensure Research Reports posted on the entity’s website (or a form of social media) do not contain information such as forward looking statements or forecast financial information that would otherwise not be permitted to be disclosed within the existing rule framework. In this regard entities should note that the requirement to have reasonable grounds to disclose prospective financial information also extends to firms providing research reports (discussed in ASIC Regulatory Guide 264). This means entities must ensure the Research Report is not being used as a de-facto mechanism to release information that it not otherwise permitted to be released.
Listed entities the subject of Research Reports should be cognisant that such Research Reports may generate price queries, as under the new policy, price movements associated with a Research Report will no longer be immediately identifiable to an announcement concerning the Research Report. Whether the Research Report may be referred to in a price query response remains to be seen.
To avoid material information entering into Research Reports, listed entities must avoid disclosing material information with persons outside of the entity not subject to confidentiality obligations, including research analysts, prior to that information being announced on the ASX market announcements platform.
Finally, the guidance above with respect to the content of the Research Report is not just confined to Research Reports. There have been several cases recently where ASX has suspended entities and issued ‘please explain’ notices where it has come to ASX’s attention that other mediums of communication, in particular social media or press articles, appeared to be used by entities as a de-facto method of releasing information (such as forward looking statements not based on reasonable grounds) not otherwise permitted for release on the ASX platform. In such cases entities have generally been required to retract or clarify such information, even though it was not released on the ASX platform.
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