Disclosing entities are regulated by the Corporations Act (2001), Accounting Standards and ASX requirements. The continuous disclosure requirements in ASX LR 3.1 require timely reporting to the ASX of significant events and financial information that is likely to impact the price of the entity’s securities. ASX LR 3.1 contains an overriding general requirement to disclose information that a reasonable person would…
The Correct Answer and Explanation is:
Correct Answer:
ASX Listing Rule (LR) 3.1 contains an overriding general requirement to disclose information that a reasonable person would expect to have a material effect on the price or value of the entity’s securities.
ASX Listing Rule 3.1 is central to Australia’s continuous disclosure regime and aims to maintain market integrity and investor confidence. Under LR 3.1, a listed entity must immediately disclose any information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities.
The phrase “material effect” is crucial. Section 677 of the Corporations Act 2001 defines this by stating that information is material if it would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the entity’s securities. This means that the threshold is whether the information could sway the investment decisions of a reasonable investor.
The continuous disclosure obligation ensures that all investors have equal and timely access to price-sensitive information, preventing insider trading and promoting fairness in the market. Examples of material information include financial results, mergers or acquisitions, changes in earnings forecasts, or significant changes in operations or management.
Failure to comply with LR 3.1 can lead to serious consequences, including regulatory sanctions, reputational damage, and civil penalties under the Corporations Act. The ASX provides guidance through Guidance Note 8, which helps entities determine what needs to be disclosed and when.
Some exceptions to disclosure exist, such as when the information is confidential, not yet fully formed, or subject to a decision-making process. However, these exceptions are strictly interpreted.
In summary, ASX LR 3.1 requires listed entities to promptly and transparently disclose any price-sensitive information that would materially influence investors, thereby fostering an informed and efficient market.
