The revised guidance note brings the definition of “officer” into line with the Corporations Act. This may unwittingly create uncertainty and chain of command difficulties for disclosing entities.
Under the Listing Rules a company becomes “aware” of information as soon as an officer has, or ought reasonably to have, come into the possession of the information. This is a broad category extending to senior company executives, receivers and administrators.
This means that monitoring what information is “reasonably” available is necessary across a number of possible positions and responsibilities, and this in turn is related to two very difficult ideas to tie down – the reasonable person, and the social media.
Another issue to arise from the revised guidance note is that of trading halts.
The recent Whitehaven Coal hoax, for instance, set off a sell-down of the company’s shares resulting in a sudden fall in share price.
Whitehaven did call a trading halt and Whitehaven’s shares recovered. But the incident brought the relationship between the power of media information, and the difficulties with deciphering and reacting to false announcements, to the fore.
Trading halts elicit diametrically opposed responses from regulators and big business. Recent media has focused on the concern of big companies such as BHP and Telstra, which have expressed concern a more active approach to trading halts could result in a negative market reaction.
Trading halts can obviously cause some investor concern, particularly with institutional investors. However the relatively low proportion of companies the requirement would apply to, and the upside to investor confidence if a more supportive environment for trading halts exists, suggest the argument has a stronger claim to long term market stability. In the larger picture, the differing perspectives are merely an aspect of the regulation/deregulation dichotomy.
Although there is varying evidence on the effect of trading halts on trading volume and price volatility it is more certain that where an efficient trading halt procedure quarantines the downsides of negative market information the possibility of enhanced confidence during normal trading periods increases.
There are many ways the market can be misinformed. Revising the continuous disclosure provisions will not necessarily remove them all, but in a market where risk, complexity and technology are obvious, the refining, and redefining, of the idea of disclosure, is crucial.
Michael Quilter is a senior lecturer, Department of Accounting and Corporate Governance at Macquarie University.
This article was first published at The Conversation.
