The Australian Government yesterday issued a determination which modifies their continuous disclosure obligations over the next six months to encourage companies to give earnings guidance to inform the market – rather than staying silent for fear of getting it wrong.
The Australian exemption is no carte blanche. Serious breaches, committed knowingly, recklessly or negligently will continue to attract liability.
This is a pragmatic response which maintains an appropriate level of accountability while also recognising the immense uncertainty created by the pandemic and we think the Financial Markets Authority (FMA) should replicate it here – not least because so many of the NZX Top 50 are also listed on the ASX.
The explanatory statement provided by the Australian Government to support the move says: “In this environment, the continuation of many businesses may depend on investment, and investors rely on timely disclosure of information to financial markets.”
In the immediate aftermath of the move to level 2 status in New Zealand, 13 of the NZX50 issuers withdrew their earnings guidance, six issuers revised existing earnings guidance and nine issuers cancelled dividends.
Only a2 Milk, Fisher & Paykel Healthcare and PushPay in the NZX50 have recently revised guidance upwards.
The New Zealand and Australian continuous disclosure regimes are stringent by international comparison, making litigation easier for regulators and aggrieved investors.
Accordingly, there has been some pressure – including through the Capital Markets 2029 review (see our commentary here) – to relax some of the requirements, while maintaining adequate investor protections.
NZX and the FMA were quick to move to provide exemptions for (periodic) financial reporting timeframes to help navigate the COVID-complexity.
As the New Zealand economy slowly picks up, we think it important that boards be encouraged to tell their shareholders and other stakeholders how they see things. Adopting the Australian exemption would be a good place to start.