ASIC continues to uncover material risks in listed entities through its surveillance of the 30 June 2022 annual reports, announcing a further six listed entities have disclosed material business risks in their 31 December 2022 interim financial reports.
The revelations bring to sixteen the number of listed entities which have now made additional risk disclosures through market announcements or subsequent interim financial reports.
The underlying purpose of the surveillance is to remind directors of the need for high-quality operating and financial reviews, particularly where disclosure of material risks might impact upon the entity’s strategies and prospects. In a media release about the revelations, ASIC noted that directors ‘must ensure that they provide investors with useful and meaningful information about the impact on the current and future performance of changing and uncertain market conditions.
Allens Linklaters’ annual report on class action risk paints a picture of a maturing sector of litigation activity where, although filings are significantly down after a peak in 2020, funders are exploring a new regulatory environment, and lawyers are developing new causes of action – particularly in cyber breaches and ESG.
In a short video, Allen’s Managing Associate Corin Morcom further pares the ESG claims by numbers and finds that climate issues are dominating ESG class action litigation.
But overall, consumer and shareholder claims continue to be in the majority. Government, retail, healthcare and industrials combined account for two-thirds of all claims. Interestingly, the Supreme Court of Victoria is taking on more of the work – traditionally dominated by the Federal Court – as it allows GCOs, or contingency fees, to be charged by the plaintiff lawyers.
The report cautions that the events of a year, taken in isolation, can’t fully explain long-term trends. But the clear takeaway is that class-action risk remains a substantial feature of the legal and governance landscapes.
ASIC has published guidance on developing good practices in response to whistleblower revelations.
The new report aims both to make revelations effective, and to encourage people to speak up. Reviewing the whistleblower programs of seven entities across a range of industries, ASIC found that ‘programs with thoughtful and well-publicised arrangements for protecting whistleblowers and handling disclosures received useful reports and tip offs about concerns and issues in the workplace.
Commissioner Danielle Press also commented that whistleblower programs play an ‘important role…in alerting entities and boards to changes necessary to help improve overall corporate performance and governance.
In an Australian first, ASIC has commenced Federal Court proceedings against Mercer Superannuation (Australia) Ltd, alleging greenwashing in its promotion of superannuation products.
The ‘Sustainable Plus’ investment options were, according to ASIC, promoted as excluding companies involved in fossil fuels like thermal coal, and companies involved in the alcohol and gambling industries. ASIC alleges that it has found copious evidence of such companies in the portfolio, and that the promotional statements were therefore false and misleading.
In a media release, ASIC says it is seeking declarations, pecuniary penalties and injunctions preventing further promotion, as well as orders requiring Mercer to publicise any findings.
In news from the long-running saga of the CHESS system replacement, ASIC has increased pressure on the ASX to ensure that it responds to the findings and recommendations of the Review conducted by Accenture, and that it uplifts identified deficiencies in relation to the ASX Group’s portfolio, program and project management frameworks.
The pressure comes by way of notices served on ASX Limited (ASX), ASX Clear Pty Ltd (ASX Clear) and ASX Settlement Pty Ltd (ASX Settlement) under sections 794B and 823B of the Corporations Act, requiring the ASX to produce two special reports on these matters.
The reports are to be provided to Ernst & Young for auditing, and the entire process, including Ernst &Young’s audit reports, is due to be completed by 31 October this year.
Regular readers of our Snapshot will recall that ASIC previously issued s.823B notices to ASX Clear and ASX Settlement to produce a special report on CHESS, and an ASIC/RBA joint letter of expectations issued to the boards of ASX Limited, ASX Clear and ASX Settlement on 17 November 2022.
ASX’s Compliance Update 10/22, published in December last year, lists reporting deadlines for a variety of entities – most of which have now passed – but more significantly it issued a strongly-worded warning about suspension penalties for late lodgement of such reports.
That warning was repeated in Compliance Update 1/23 and again in 2/23, published in late February, firmly underlining the importance the ASX is placing on this issue.
The latter update also features information about the legal requirement to have at least two Australian-based directors on the boards of listed entities, and detailed guidance on reporting for Mining Entities.
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