The ASX has tightened its listing rules in the wake of recent media reports highlighting alleged disclosure breaches.
In a compliance update released late last week, the ASX strengthened its guidelines to stamp out the over exaggeration of gains from customer contracts and also announced immediate changes to rules relating to past misconduct by Directors.
The ASX said it would crack down on companies that announce contracts with major global customers that lack details; that don’t mention the contract is conditional or subject to a trial period; that include loosely derived revenue projections; that aren’t updated if the contract is terminated: or are presented as material; or with other ‘superlatives’ when they are not.
“Whenever the ASX detects this sort of behaviour it will not hesitate to suspend the entity, query it and require it to correct any inadequate or misleading disclosures,” the ASX update said.
It said it could also refer any entity to the Australian Securities and Investments Commission for consideration of further action. The ASX also reminded companies that statements about projected revenue to be derived from customer contracts will be considered forward-looking statements and “therefore must have a reasonable basis in fact or else it will be deemed to be misleading.”
AusBiotech strongly encourages companies in the life science sector to adopt best practice in reporting events to investors and reminds companies to regularly review the Code of Best Practice for Reporting by Life Science Companies, which was developed in partnership with the ASX.
High standards of communication and market disclosure promote investor confidence, an important factor in enhancing market liquidity and availability of capital for life science companies. As well as these benefits, the focus required of a publicly-listed company in gathering and analysing information to support the disclosure is in itself valuable. There are specific areas of complexity in the life science sector that make communication with the market potentially challenging.
Examples of these areas include the complexity of the science, long development lead times, significant ongoing capital requirements, regulatory hurdles and complex intellectual property issues.
How does the Code of Best Practice for Reporting by Life Science Companies interact with the ASX listing rules?
The Code does not replace or modify any of the disclosure obligations imposed by Listing Rule 3.1, which is the primary disclosure obligation to be discharged by listed companies subject to the test of materiality and the exceptions specified by the rule. The Code is designed to assist listed companies to adopt reporting practices that provide investors and the market with full and accurate information on their activities.
The Code complements Listing Rule 3.1 in the following ways:
- It recognises the particular activities, issues, and events that might give rise to disclosure obligations for companies in the life science sector, and provides guidance to companies on circumstances in which disclosure obligations might apply;
- It provides guidance to companies on the level of detailed information expected to be disclosed in circumstances where disclosure is required; and
- It strengthens the clarity of disclosures by an explanation of the terms typically used in material disclosure statements by life science companies.
AusBiotech this week conducted two seminars in Melbourne and Sydney aimed at preparing life sciences companies for the unique challenges of an IPO. The Roadmap to a successful IPO for life sciences companies seminars were developed in partnership with the ASX, KPMG, DibbsBarker and WE Buchan. The Roadmap is one of the three main components of the MTPConnect-funded ‘Comprehensive Global Investment Program for the Australian Life Sciences Sector – companies, investors and researchers’ project.