We have recently experienced an increased in the number of listed companies commissioning third party analysts or brokers to prepare “independent” reports on the company and subsequently announcing, or referring in public announcements to, that report.

Such reports often contain information that has not been released to market under a company’s continuous disclosure obligations, or otherwise contain information presented in a manner that is inconsistent with the requirements of the ASX Listing Rules, Corporations Act or guidance from ASIC and ASX.  Examples include:

• earnings guidance or production targets that have not been prepared in accordance with ASIC Regulatory Guide 170 (Prospective Financial Information); and
• scoping studies based on historical or foreign resource/reserve statements in a manner that is inconsistent with the requirements of Chapter 5 of the ASX Listing Rules or the JORC Code.

ASX is of the view that market sensitive material in such reports should have been released by the company prior to the report being released.  Where that information has not been previously disclosed, ASX considers that the information is being released solely for marketing purposes and not for legitimate information purposes, or is being released through a third party report to circumvent the disclosure requirements imposed by ASX and ASIC.

If such information is released, ASX is likely to require that a further announcement is released to address any concerns identified by ASX.  This often requires a retraction or withdrawal of information.  Companies will generally be suspended from trading until such corrective disclosure is released.

In some circumstances, reports may be circulated to select clients of the reporting party without the report being publicly released.  This raises separate issues with respect to the insider trading prohibitions under the Corporations Act, breach of which can have serious consequences both from a criminal and civil liability perspective..

The above highlights the importance of seeking suitable advice prior to release of market sensitive announcements to ensure that information is reported in accordance with applicable regulatory requirements.