Thursday 5 October 2006 – LAWFUEL – Law News Network – The Australia…

Thursday 5 October 2006 – LAWFUEL – Law News Network – The Australian Securities and Investments Commission (ASIC) today emphasised the importance of listed entities providing timely and accurate announcements to the market, following the release of a report on small and mid-cap miners.

The report identified potential concerns about the effectiveness of disclosures by these companies to the market. ASIC is reviewing disclosure patterns and practices in a number of speculative market sectors. Proper communication of information to investors in these sectors is critical because of the widespread use of technical information and industry jargon. ASIC is concerned that some entities may be making announcements for promotional purposes rather than as a means of informing investors, and that this could potentially result in investors being misled.

The Australian Stock Exchange (ASX) Guidance Note 8 ‘Continuous Disclosure: Listing Rule 3.1’ states that the Company Announcements Platform (CAP) ‘should not be used for promotional purposes’ and that ‘[a]nnouncements must be balanced and truthful’.

ASIC’s initial review, which focussed on mining companies, aimed to detect entities that demonstrated a pattern of very frequent disclosure alongside significant share price increases, as this could be indicative of poor disclosure practices. ‘ASIC does not want to discourage companies from making full, frank and frequent disclosures where appropriate.

Nevertheless, listed entities should ensure material new information is effectively disclosed to investors’, Ms Jennifer O’Donnell, ASIC Executive Director of Compliance, said. In particular, entities should: • provide information in an easily understandable manner; • give due prominence to any associated risks and uncertainties; • avoid overstating the significance of new information or underemphasising negative information; and • avoid unnecessary repetition of previously disclosed information. These issues are particularly relevant in industries with speculative characteristics, like mining, energy and biotechnology.

ASIC’s recent review involved an analysis of the disclosure patterns of over 400 small and mid-cap miners (market capitalisation of $500 million or less) listed on the ASX. The review looked at the number and type of market announcements, as well as share price movements, during the 2006 financial year for these miners. ‘Reviews of this type allow ASIC to identify potential risk areas, or where to focus its efforts in terms of surveillance activities and education of the market’, Ms O’Donnell said.

‘Over the coming weeks, ASIC will be reviewing the market disclosures by some of these miners to assess whether further inquiries are warranted. Our aim is that, by making clear to the market the quality of disclosures that we expect, there will be fewer instances of inappropriate disclosure. We are working with the ASX to improve the overall quality of disclosure for investors’, Ms O’Donnell added. ASIC may also conduct reviews of energy and biotechnology companies. Biotechs, in particular, have been the subject of several ASIC actions in the past year relating to market disclosure.

Two of the five infringement notices issued to date by ASIC were to biotechs, and a biotech was also the subject of a court-ordered civil penalty fine. ASIC may also examine other situations where patterns of announcements and share price movements may suggest poor disclosure practices, for example, entities with large share price movements but a minimal number of announcements. A copy of the ASIC’s Small & Mid-Cap Miners Study is available at For further information contact: Jennifer O’Donnell Executive Director Compliance Telephone: 02 9911 2131 Mobile: 0411 549 257 Angela Friend ASIC Media Unit Telephone: 03 9280 3338 Mobile: 0412 058 800

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