Australia’s securities regulator will attend analyst meetings at about 20 companies next month as part of a clampdown on selective briefings, after questions were raised about broker coverage of Newcrest Mining Ltd.
The Australian Securities and Investments Commission will also listen in on some one-on-one calls with analysts, Commissioner Cathie Armour said in an interview in Sydney yesterday. She declined to name the companies, saying they were picked to represent a spread of industries and locations and weren’t necessarily suspected of any wrongdoing.
Newcrest shares fell 12 percent in the two days before the company announced a possible A$6 billion ($5.6 billion) writedown June 7, raising concerns of selective briefing that have been denied by the Melbourne-based gold producer. Australia requires companies to disclose all market-sensitive information to the Australian Stock Exchange, and the Commission announced it would be running spot checks of analyst briefings July 7.
“We are hoping that as part of this exercise both companies and research houses are actually having a good look at their own processes and procedures,” Armour said. Companies suspected of selective briefing won’t necessarily be targeted for spot checks as ASIC would have investigated them already, and some of the businesses were picked as examples of best disclosure practice, she said.
ASIC will alert companies selected for the spot checks and “it would be appropriate” for them to share with analysts the fact that the regulator is listening in, Armour said. All the companies involved end their fiscal years in June and will be presenting annual results during August, she said.
“I don’t think they’re trying to catch someone with a smoking gun,” Evie Bruce, a partner at lawyers King & Wood Mallesons in Sydney, said by phone. The regulator is “trying to make sure, following the Newcrest incident, that they get as much behavioral change out of it as possible,” she said.
The decision to alert companies in advance was akin to putting up signposts on roads close to speed cameras, Bruce said. “They’re trying to raise awareness and improve behavior.”
Newcrest named former Australian Securities Exchange Chairman Maurice Newman to head an internal inquiry into the company’s disclosure and investor-relations policies, the producer said on a June 25 conference call.
“We do not think we have done anything wrong,” Chairman Don Mercer told reporters on the call. “If we have, we want to know about it and I can assure you we will hold people accountable from top to bottom.”
Newcrest Chief Executive Officer Greg Robinson said investor relations staff had held meetings prior to the company’s announcement and insisted that they acted in accordance with regulations.
ASIC is stepping up monitoring of the stock market, which it gained responsibility for in August 2010, and prosecutions of insider trading. The agency has prosecuted 28 cases of insider trading since 2010, triple the number over the previous 15 years.
The regulator took enforcement action in the courts or through its own processes against 371 companies during the six months ended June, according to a twice-yearly report issued today. Of those actions, 78 related to corporate governance, market integrity, and financial services, with the rest relating to small businesses.