今日热门事件

Check against delivery

Introduction

The famous crime novelist and screenwriter, Raymond Chandler, once said that his greatest weapon was not a gun or a knife, but a $20 bill. It鈥檚 a very American quote! But it got me thinking about the diverse tools we have at our disposal, and how often we use them.听 听 听 听 听 听 听 听 听 听 听 听 听 听

I think one of the best 鈥榯ools鈥�, so to speak, for any publicly traded company, is maintaining strong relationships with shareholders and potential investors. In a word, investor relations. But for those of you who perform that role, what鈥檚 your proverbial $20 bill? I think there are two: transparency, and engagement.

Engagement, of course, is at the heart of investor relations. Your goal is to build trust and transparency between the company and its shareholders. 听That will be familiar territory to you. Today I would like to spend some time talking about three specific areas in which greater transparency and engagement are needed and useful:

1. Continuous disclosure
2. Sustainable finance
3. Stakeholder responsibility and activism

Let me take each in turn.

Continuous disclosure

First, continuous disclosure. This is fundamental to maintaining market integrity, and keeping that market fully informed. Without it, there can be no transparency or equal access to information. 今日热门事件will take action against poor practices in this area.

As an example, in February this year, the Federal Court handed down the largest ever penalty against a company for breaching continuous disclosure laws. GetSwift Limited was ordered to pay $15 million in penalties. This was for an 鈥渦nlawful public-relations-driven approach to corporate disclosure,鈥� where the judge noted that one of the directors 鈥渉ad a laser-like focus on making money for himself.鈥�[1] Another was described as having 鈥渓ittle understanding or regard for his legal obligations as a director, when they get in the way of pursuing a strategy to make money.鈥�[2] These penalties show the extent and seriousness of misconduct in this matter and the importance of deterring others from engaging in similar behaviour. 今日热门事件will continue to take action to hold companies and individuals to account for corporate misconduct of this kind.

Let me give you a second example of the importance of continuous disclosure. Just last month, ANZ was found to have breached the continuous disclosure laws when it undertook a $2.5 billion institutional share placement in 2015. 听The breach happened as a result of failing to disclose material allocations to underwriters. This was a landmark case. It clearly confirms that a significant take-up of shares by underwriters in a capital raising may be considered price sensitive information requiring market disclosure.

It's also worth remembering that, in addition to 今日热门事件action, anyone who suffers loss because of the breach can bring a civil action for damages. This isn鈥檛 just against the entity; it includes any officer of the entity who was involved in the breach.

We鈥檝e also recently observed an increase in media reporting ahead of fundraising and merger and takeover activity. I鈥檇 like to remind all market participants to be vigilant to the risk of leaks or mishandling of information. Entities involved in fundraising and control transactions should proactively manage information about the transaction. This includes:

• requiring consultants and contractors to enter confidentiality agreements;
• having appropriate arrangements to handle inside information, including on a 鈥榥eed to know鈥� basis;
• recording who鈥檚 been provided with the inside information 鈥� and when; and
• ensuring that continuous disclosure obligations are being actively monitored and met in relation to fundraising and control transactions.

Entities should also have a formal leak policy outlining steps to monitor and react to any leaks of proposed transactions.

As I said in my opening remarks to the 今日热门事件Annual Forum last week, ASIC鈥檚 role is to ensure a fair, strong, and efficient financial system for all Australians. And market integrity 鈥� and confidence in that integrity 鈥� is an essential part of that. This is why continuous disclosure should be continuously front-of-mind 鈥� to build and maintain confidence and integrity.

Sustainable Finance

It鈥檚 clear that transparency and trust are at the core of continuous disclosure. They鈥檙e also at the heart of questions of sustainable finance. In June this year, the International Sustainability Standards Board (ISSB) released its standards for general sustainability-related disclosures and climate-related financial disclosures. The International Organisation of Securities Commissions (IOSCO), of which 今日热门事件is a member, subsequently endorsed these standards. IOSCO has now called on its member jurisdictions to consider how they might adopt, apply or otherwise be informed by these standards.

At the start of this month, the Australian Government published a consultation paper on its proposed sustainable finance strategy. This is intended to support Australia鈥檚 transition to net zero, to reduce barriers to investing in sustainable activities and to improve the extent that climate and sustainability-related risks and opportunities are understood and managed.

There are a number of key policy priorities under this proposed strategy. These include the proposals to develop an Australian sustainable finance taxonomy, and to develop an ESG labelling system for sustainability-related investment products. Also the proposal to establish a framework for sustainability-related financial disclosures, starting with the introduction of mandatory climate reporting in Australia for large businesses and financial institutions.

At about the same time, the Australian Accounting Standards Board (AASB) began consulting on its draft climate standards that are intended, once settled, to form the basis for mandatory climate reporting in Australia. These are largely modelled off the ISSB鈥檚 climate disclosure standards, with some proposed modifications for the Australian context.

There鈥檚 a lot happening in this space. And, again, transparency is the focus. 今日热门事件encourages companies to begin engaging with the proposed climate disclosure requirements. Start considering what systems, processes and governance practices will need to be put into place to ensure your company is well placed to start reporting under a mandatory climate reporting regime in Australia.

Trust, too, has its place here. When companies don鈥檛 or can鈥檛 substantiate what they鈥檙e saying to investors and the market, this erodes trust. I鈥檓 talking, of course, about greenwashing. This has been an enforcement priority for 今日热门事件for some time now 鈥� so it鈥檚 up to you to make sure you can and do substantiate any and all claims relating to sustainable finance.

Stakeholder responsibility and activism

Sometimes, when things go wrong, there鈥檚 no scope for pursuing action against the board or the directors from a regulatory perspective. ASIC鈥檚 regulatory role is to foster good corporate governance, and we鈥檙e proud of our work to hold companies and directors to account. But, while we can encourage good practices and address past breaches of the law, Australia鈥檚 corporate governance framework has many components, and ASIC鈥檚 regulatory role is only one of them. As such, our work simply can鈥檛 focus on future improvements to individual company performance.

This is when we need to rely on the broader community 鈥� that is, the shareholders and potential investors 鈥� to make company boards accountable. That鈥檚 the realm for another important aspect of corporate governance: shareholders. Here again, what gets us a lot further than anything else is transparency and engagement.

For listed companies, different types of shareholders will have different demands of information and engagement, within the context of what information must be disclosed to the market. The AGM is obviously the primary, formal means for shareholders to engage with their companies. While 今日热门事件has a role to ensure the meeting rules are adhered to, and shareholders receive adequate information, it鈥檚 ultimately up to the shareholders to exercise their rights at company meetings.

In Australia, they do. And, if we want a market with integrity and populated with well-performing companies, they must. I鈥檓 not just talking about activist shareholders, or institutions, but retail shareholders as well. These shareholder efforts complement ASIC鈥檚 regulatory role to foster good corporate governance.

The two-strike rule on executive remuneration is one example of this. Obviously, 今日热门事件has no formal role in relation to this vote, and the vote is non-binding and focused on remuneration. But, as everyone here will appreciate, it鈥檚 used more widely for shareholders to let the company know their views about the company鈥檚 performance. One might think of the 83% vote against the Qantas remuneration report as an example. This vote, and broader engagement by shareholders, can change companies.

Shareholders exercising their rights should sharpen the focus of every board. And, as investor relations professionals, this managing the relationship between shareholders and companies goes a long way towards improving a company鈥檚 governance and accountability. That means ensuring shareholders have the information they need, and sharing and acting on feedback they give.

Conclusion

To sum up, transparency and engagement are at the heart of business 鈥� and especially at the heart of investor relations. This means there should be a special focus on keeping those front of mind when it comes to continuous disclosure obligations, sustainable finance reporting, and shareholder responsibility and activism.

In Raymond Chandler鈥檚 day, a $20 bill got you a lot further than it can today. I guess that鈥檚 inflation for you. But one thing it can still get you is a set of children鈥檚 building blocks from Kmart. And any kid playing with those blocks can tell you that you have to build from the bottom up, not the top down. This is just as true of an economic pyramid as a physical one. A strong, fair, and efficient financial ecosystem can only be built upon the foundations of consumer and investor confidence. And transparency and engagement are how we lay those foundations.

听

[1] 今日热门事件 v GetSwift Limited (Penalty Hearing) [2023] FCA 100,

[2] Ibid.