Proposals by the Australian Securities Exchange (ASX) to tighten earnings guidance by listed entities will result in a less informed market and provide greater potential for earnings surprises, an investor relations organisation said.
The Australasian Investor Relations Association (AIRA) said it was concerned some of the more substantive proposals would be contrary to the best interests of both issuers and investors.
“We are a supporter of the major rewrite of Guidance Note 8, and confirm that in our view the current rules provide valuable assistance to issuers with regard to market disclosure generally,” AIRA’s chief executive, Ian Matheson, said.
In response to the paper AIRA said the proposals go beyond the level of necessary guidance and appropriate from ASX because guidance relates to the provisions of the Corporations Law that falls under the Australian Securities and Investments Commission (ASIC) and not the listing rules, which the ASX is responsible for developing and upholding.
AIRA also noted that the proposal fails to appreciate that what the ASX views as guidance will be viewed by many as tantamount to regulatory requirements.
AIRA’s response said that these issues would result in a less informed market and a greater potential for earnings surprises as “companies will become very reluctant to provide guidance even where they otherwise believe it to be both appropriate and safe in the sense of having reasonable grounds to do so.”
AXA’s consultation paper is currently open for industry feedback.
