The Senate economic reference committee has criticised the Government’s bill on continuous disclosure requirements and recommended it does not get passed, saying the Government’s proposals would be “foolish and dangerous”.
In a summary of evidence submitted to the Senate for the Treasury Laws Amendment (2021 Measures No.1) Bill, the committee stated it was against Schedule 2 of the Bill being passed.
This sought to make temporary measures for the requirements, which were introduced during the pandemic, a permanent law. They were intended to include the permanent introduction of a “fault element” to prevent directors from “opportunistic” class actions while ensuring the market was kept informed of material information.
Following evidence submissions and hearings, the committee concluded that Schedule 2 was a “solution in search of a problem”. Some 80% of company directors, it said, did not think there was a need for a change to the requirements.
“The committee considers that the proposed changes in Schedule 2 are a solution in search of a problem. Indeed, the committee considers that Schedule 2 could be regarded, with some justification, as a textbook example of how governments should not develop legislation.
“For starters, in developing the measures in Schedule 2, the government did not consult with a single advocate for retail investors—the people who are most likely to be negatively affected by the changes to continuous disclosure laws. Nor did the government consult with any institutional investors, academic experts or independent economists.
“It may be that there are cogent and evidence-based arguments in favour of the changes in Schedule 2. But the committee has not heard them, and the government has not made them. Instead, the government has made numerous claims that have not withstood even the slightest degree of scrutiny.
“The existing continuous disclosure regime is, as outlined by ASIC, a fundamental tenet of our markets and is particularly important during times of market uncertainty and volatility. Against that background, the committee considers that it would be foolish and dangerous to water down the continuous disclosure regime— especially in the absence of a credible and independent review.”
If the measures were passed, it said, it would make it more difficult for shareholders to hold directors accountable for withholding price-sensitive information or providing misleading information and lead to a decrease in the amount of information disclosed to the market.
It would also have a negative impact on retail investors who relied on information provided to the market by listed entities.