ASX looks to censures, suspension as market enters 2025

The head of the ASX’s compliance team says the market operator won’t tolerate evasive answers and overly optimistic updates from listed companies.

The ASX is looking to expand its use of censure powers, previously exercised only sparingly by the market operator. Picture: NewsWire / Damian Shaw

The Australian Securities Exchange has warned of a crackdown on listed companies in the year ahead, saying it is increasingly willing to castigate executives in public over poor disclosure.

ASX chief compliance officer Daniel Moran told The Australian on Thursday that while many companies kept their investors informed, some fell far short.

Mr Moran said the ASX was looking to expand its use of censure powers, previously exercised only sparingly by the market operator.

These powers, only introduced in December 2019, allow the ASX to issue formal public warnings when a company has fallen far short of its standards, allowing it to criticise responses from a listed operator.

Mr Moran, a lawyer who in October 2022 took on the job of keeping Australia’s largest market clean, said the ASX was also looking at stepping up writing to boards of listed companies over concerns with market dis­closure.

He said the ASX would issue cautions if disclosures were “not up to scratch”, suggesting what action could or should be taken. “We might also impose a requirement under the rules to engage a third party to do a review or issue a report or do an audit and put in place new disclosures policies,” Mr Moran said. “The thinking is that all of these things, particularly in the case of a censure, shine a light on the market so that investors understand that a company and its management aren’t doing what they ought to be.”

ASX chief compliance officer Daniel Moran.

Mr Moran said these powers put a burden on companies and management.

The 2019 move to give the ASX powers to censure listed companies brought the market operator into line with other offshore exchanges.

The ASX can also refer bad behaviour to the Australian Securities & Investments Commission, which was handed many of the enforcement powers previously held by the market operator in 2010.

This saw ASIC take on supervision of licensed financial markets, with 23 staff leaving the ASX for the regulator.

Mr Moran said the ASX, which routinely spoke with ASIC, referred matters to the regulator when a company met its internal tests of a “significant breach” of the listing rules or the Corporations Act.

This involved the ASX handing ASIC a brief, which Mr Moran noted was similar to those exchanged between a solicitor and barrister.

But he said the ‘‘conversion rate’’ for many of the matters reported by ASX to ASIC was “quite low”, as the threshold for the market operator to raise matters was often lower than the regulator’s own tests.

ASIC has previously been criticised for failing to investigate or prosecute many of the matters referred to it, with a Senate inquiry taking aim at the regulator over its track record.

However, ASIC is currently suing several companies, including Magnis Energy Technologies and its chairman Frank Poullas, over alleged repeated market disclosure failures.

As revealed in The Australian, Magnis repeatedly spruiked business opportunities with companies that failed to eventuate or boasted of manufacturing that was not happening, and denied links with organised crime figures despite evidence to the ­contrary.

The ASX is also facing enforcement action from ASIC, which alleges the market operator failed to reveal to shareholders problems in its attempts to replace its CHESS clearing and settlement platform.

ASIC deputy chair Sarah Court and chair Joe Longo. Picture: NewsWire/Josie Hayden

Mr Moran said ASIC was the right place for market enforcement powers. “For serious matters, they should be treated seriously and have quite serious consequences,” he said.

He said the ASX was well placed to police elements of poor conduct that fell short of regulatory attention. The market operator was “typically pretty quick and pretty flexible”, he said.

“The hurdles we need to jump over to make a determination and to issue some kind of consequence is much lower than for ASIC. The flip side is the consequences are much lower,” Mr Moran said.

Some of the ASX’s other powers include issuing companies a ‘‘please explain’’ letter, demanding answers on matters often in the media, or issuing listed operators with a ‘‘speeding ticket’’ for unexplained movements in the share price.

Mr Moran said the ASX was looking at movements of 10 per cent or more in the share price of companies around results season, which could suggest forward guidance was lacking.

The ASX can also pull shares from trade, placing them in suspension or a trading halt.

Mr Moran said the benefits of stopping trade had to be weighed up against its impact on investors. “It’s possible there could be a scenario where we’re asking them something that’s important to us but it is less important to an informed market,” he said.

“In that case I’d be a little bit more careful about using the suspension power.”

Of 2000 listed companies – and a further four slated to join trading boards in the first quarter of 2025 – only 69 companies are facing long-term suspension.

These companies face delisting if they are unable to meet the market operator’s requirements to remain on the trading boards.

Much of Australia’s market weight is concentrated in its top 200 stocks, most of which play by the ASX’s rules.

Mr Moran said the ASX usually wrestled with poorly behaved companies in the middle and lower ranks of the market.

He said the ASX was concerned about companies ‘ramping’ their share price and releasing rosy updates to investors.

“It’s an ongoing area of focus,” Mr Moran said.

“When it crosses over into pumping up or ramping the share price, we jump on that pretty quickly.”

Originally published as ASX looks to censures, suspension as market enters 2025