ASIC releases guidelines for handling confidential information

The Australian Securities and Investments Commission has now released its guidelines for handling confidential information for listed companies, in an attempt to improve market practices.

The department yesterday released its consultation paper Handling Confidential Information, in which it says companies and advisors should benchmark themselves and strengthen procedures used for dealing with confidential information.

“These guidelines outline the standards of conduct and practices ASIC believes companies should require from their directors and staff, and also from their transactional advisers and other service providers,” commissioner Belinda Gibson said in a statement.

“The statement of best practice may facilitate companies insisting on reciprocal standards from others in the market.”

The consultation paper states ASIC is concerned about the leaking of private information regarding transactions before their announcements, and said it had observed a number of instances of abnormal trading before a large announcement had occurred.

“There also appears to have been considerable leakage of inside information to the media prior to the formal announcement of transactions,” it said.

The paper comes after a similar document was released in September outlining measures for stockbrokers and advisers to verify and record rumours.

The new consultation paper recommends:

• Companies maintain a register of all people at the company, and all company advisors, who remain “inside” on sensitive transactions. The regulator said making a list of insiders could deter careless or inappropriate behaviour.
• All information related to a major transaction should be documented and labelled according to the level of classification it requires.
• If a leak occurs, an investigation should be performed by each party which had access to that information.
• Companies using investment banks should practice “umbrella agreements”, which would set out the general practices an advisor must use when working with the company.
• A sounding should only occur when the market is closed, or if stock is in a trading halt. After 48 hours from the sounding, the investment bank should let ASIC know the name of all institutions contacted, the time and date and details of the deal.

Additionally, the paper recommends all parties involved in corporate transactions will have appropriate share dealings pre-approved and should agree to have phone and email records investigated if a leak occurs.

While the proposals are not legally binding, the final release of guidelines by ASIC is expected to be adopted by several companies. ASIC believes these regulations will keep Australia in line with other countries, including the US and Britain.

“ASIC’s goal in developing these best practice guidelines is to help parties ensure that confidential, price-sensitive information is provided to all the market in a timely manner, through the ASX announcements platform, rather than provided selectively to some participants at an incomplete stage,” it said in the report.

“These guidelines outline the standards of conduct and practices ASIC believes companies should require from their directors and staff, and also from their transactional advisers and other service providers.”