ASX loosens the lid: when counterparties can stay confidential

In Compliance Update No. 02/25, the ASX clarified its approach to the disclosure of counterparties in market sensitive contracts, outlining broader circumstances where a listed entity may provide a description of the counterparty instead of disclosing their name in announcements.

Background

Under Listing Rule 3.1, listed entities must immediately disclose any information that a reasonable person would expect to have a material effect on the price or value of its securities. The ASX has traditionally maintained that, when announcing market sensitive contracts, the identity of the counterparty is usually material and should be disclosed to allow investors to properly assess the effect of the transaction accurately. Previously, exceptions to this requirement have been limited, typically applying to dealings with government agencies or entities in the defence or security industries.

Revised approach

The recent Compliance Update provides further guidance on circumstances where the disclosure of a counterparty’s identity may not be required. If a listed entity determines that the counterparty’s identity is not, in itself, market sensitive information, the entity may choose not to disclose the name, provided that the announcement includes:

1. a statement confirming the entity’s belief that the counterparty’s identity is not information that a reasonable person would expect to have a material effect on the price or value of the entity’s securities;
2. a confirmation that the announcement contains all material information necessary for the market to assess the contract’s impact on the entity’s securities and that the announcement is not misleading; and
3. a sufficiently detailed description of the counterparty to allow the market to assess the counterparty’s standing and creditworthiness without revealing their identity.

This approach acknowledges that there may be legitimate commercial reasons for not disclosing a counterparty’s identity, extending beyond the previously recognised exceptions. However, the ASX emphasises that situations where non-disclosure is appropriate are likely to be rare and should be carefully considered.

Implications for listed entities

Listed entities considering the non-disclosure of a counterparty’s identity should:

1. conduct a thorough assessment to determine whether the counterparty’s identity is genuinely not material to the market’s evaluation of the contract;
2. ensure that all other material information about the contract is fully disclosed, and that the announcement is accurate and not misleading; and
3. provide a comprehensive description of the counterparty, detailing aspects such as industry position, financial standing, or other relevant factors that would enable investors to assess the significance of the contract.

In addition to a description of the counterparty, the ASX generally expects the following additional information to be disclosed:

• for acquisitions or disposals, a description of the assets or business involved;
• in customer contracts, the nature of the products or services to be supplied;
• the consideration payable under the contract, as well as the term or expected completion date;
• for acquisitions, the intended source of funds, and for disposals, the use of proceeds;
• any material conditions or approvals required for the transaction to proceed; and
• any other material information that may impact the price or value of the entity’s securities.

It is important to note that the ASX retains the right to request further information or take enforcement action if an announcement is found to be incomplete, inaccurate, misleading, or if it triggers a significant market reaction following the release. The ASX will also continue to monitor for ‘ramping announcements’ (statements that may artificially influence the market) and will intervene where necessary to maintain market integrity.

Key takeaways

The ASX’s revised approach provides listed entities with additional flexibility regarding the disclosure of counterparties in market sensitive contracts. However, this flexibility comes with the responsibility to ensure that any decision to withhold a counterparty’s identity is justifiable, carefully assessed, and supported by comprehensive disclosure of all other material information. Listed entities must remain diligent in their continuous disclosure obligations to uphold market transparency and investor confidence.

This article was written by David Naoum, Partner and Lachlan Pearce, Solicitor.