Firstly, I believe JAT was obligated to release this information as soon as it was made aware of it under the ASX listing rules. Secondly, yes, it should have been price sensitive under listing rule 3.1.
Listing Rule 3.1 requires a listed entity to disclose information “concerning it” that “a reasonable person would expect to have a material effect on the price or value of the entity’s securities”. This type of information is referred to in this Guide as “market sensitive information”. The notes to Listing Rule 3.1 give the following examples of the type of information that could be market sensitive:
- a transaction that will lead to a significant change in the nature or scale of the entity’s activities;
- a material mineral or hydrocarbon discovery;
- a material acquisition or disposal;
- the granting or withdrawal of a material licence;
- the entry into, variation or termination of a material agreement;
- becoming a plaintiff or defendant in a material law suit;
- the fact that the entity’s earnings will be materially different from market expectations;
- the appointment of a liquidator, administrator or receiver;
- the commission of an event of default under, or other event entitling a financier to terminate, a material financing facility;
- under subscriptions or over subscriptions to an issue of securities (a proposed issue of securities is separately notifiable to ASX under Listing Rule 3.10.3);
- giving or receiving a notice of intention to make a takeover; and
- any rating applied by a rating agency to an entity or its securities and any change to such a rating.
This list is by no means exhaustive and there are many other examples of information that potentially could be market sensitive. For these purposes, “information” extends beyond pure matters of fact and includes matters of opinion and intention. It is not limited to information that is generated by, or sourced from within, the entity. Nor is it limited to information that is financial in character or that is measurable in financial terms. Under Listing Rule 3.1, an entity must disclose all information concerning it that it becomes aware of from any source and of any character, if a reasonable person would expect the information to have a material effect on the price or value of its securities.
The test for determining whether information is market sensitive and therefore needs to be disclosed under Listing Rule 3.1 is set out in section 677 of the Corporations Act. Under that section, a reasonable person is taken to expect information to have a material effect on the price or value of an entity’s securities if the information “would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of” those securities.
It should be noted that the test in section 677 is an objective one and the fact that an entity’s officers may honestly believe that information is not market sensitive and therefore does not need to be disclosed will not avoid a breach of Listing Rule 3.1, if that view is ultimately found to be incorrect.
ASX acknowledges that because of this, the test for determining the materiality of information in section 677 can give rise to some difficulty in practice for listed entities in assessing whether or not they have an obligation to disclose information under Listing Rule 3.1. They are effectively required to predict how investors will react to particular information when it is disclosed. In some cases this may be fairly obvious but in others not so. However, this difficulty is inescapable. It is the entity, and only the entity, that can and must form a view as to ASX Listing Rules Continuous Disclosure: An Abridged Guide Page 4 whether the information it knows, and the rest of the market does not, is market sensitive and therefore needs to be disclosed under Listing Rule 3.1.
An officer of a listed entity who is faced with a decision on whether information needs to be disclosed under Listing Rule 3.1 may find it helpful to ask two questions:
(1) “Would this information influence my decision to buy or sell securities in the entity at their current market price?”
(2) “Would I feel exposed to an action for insider trading if I were to buy or sell securities in the entity at their current market price, knowing this information had not been disclosed to the market?”
If the answer to either question is “yes”, then that should be taken to be a cautionary indication that the information may well be market sensitive and, if it does not fall within the carve-outs to immediate disclosure in Listing Rule 3.1A (see below), may need to be disclosed to ASX under Listing Rule 3.1.
Given the significant penalties that a breach of Listing Rule 3.1 and section 674 can attract, ASX recommends that listed entities and their officers exercise appropriate caution in assessing whether information is market sensitive or falls within the carve-outs from disclosure in Listing Rule 3.1A, and that they carefully weigh up the potential consequences of not disclosing particular information in any given case.
It should be noted that a listed entity must disclose information under Listing Rule 3.1 and section 674, even if does not appear to be in its short term interests to do so (eg because the information might have a materially negative impact on the price of its securities and jeopardise a transaction that it is trying to conclude). It must also comply with those obligations even where it is party to a confidentiality or non-disclosure agreement that might otherwise require it to keep information confidential.
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